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IUL Annual Reset

Average s&p return as of 2023
Insurance Quotes 2 Day Team

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

 2 minute read

Would it be important to you if after having a terrible year with your investments, that you could, with one stroke, replace all of your losses with a zero, reset each account, and then start the new year in a better market position?

Did you know that this “magical do-over” is completely possible if you own an Indexed Universal Life Insurance policy? It’s called the IUL annual reset.

For example, let’s say that you own an IUL that is linked to the S&P 500. During a horrific year, the market delivers a significant loss rather than an expected gain and everyone who is directly invested in this index takes a financial beating because of the poor performance during the year.

But what happens if your IUL is linked to the S&P 500 rather than directly invested in it?

What is an Annual Reset?

With the annual reset, each year’s interest credits are locked in on a date that corresponds with the Index Crediting Date. The interest credits cannot be removed if negative performance occurs, meaning that in future years, your policy will gain the advantage of compounding interest.

In simpler terms, annual reset means that this year’s ending index value becomes the starting value for next year. So, the index doesn’t have to make up for the prior losses to earn interest in the new year.

And once again, because of the power of the annual reset, any indexed interest received is locked in and cannot be lost as a result of market volatility.

Therefore, the only way in which your cash value account will be reduced is because of the policy fees that are charged each month your IUL policy is in force.


What are the other Moving Parts of an IUL?

Your Indexed Universal Life policy is anything but straightforward. But the various moving parts contained in your policy are what keep your cash account from losing significant value.

  • Participation Rate: Your cash value gains are calculated according to the insurance company’s “participation rate.” This is the portion of the index’s return credited to your account. Participation rates currently range around 100% to 140%.
  • Floor Rate: Your IUL insurance policy will contain a “floor rate” which represents the minimum interest rate that can be credited to your policy’s cash value account. This means if your policy contains a 0% floor rate and your indexes post a loss of 5%, your account would be credited 0% rather than the 5% loss.
  • Cap:  Some IUL index allocations have a cap that represents the maximum amount of interest that can be credited to your cash account in a reporting period. For example, if your indexes post an interest rate of 14% in a reporting period but your cap is 11%, the rate credited to your account will be 11%. Some companies offer an uncapped policy but this is normally offset by a lower participation rate.

Is Indexed Universal Life Insurance Right for Me?

Optimal structuring of an IUL is best done together with an experienced advisor. Fill out the quote request form on this page or call us at 1-800-712-8519 to get started.

author avatar
Doug Mitchell, CLU Independant Advisor
Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent almost 30 years in the life insurance industry and has also held licenses to sell securities, long-term care insurance and home and auto insurance. Doug is a Top of the Table Million Dollar Round Table member (MDRT).  MDRT is a global, independent association of the world's leading life insurance advisors.  For two years, Doug served as President of the Auburn Opelika Association of Financial Advisors and has been a member of the Million Dollar Round Table. He obtained Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award. Later in his career with New York Life he was an Executive Council Member. Doug currently serves as President of Ogletree Financial, a managing general agency serving life insurance agents and clients in all parts of the United States. Today, Doug’s main focus is servicing 1000s of policyholders and growing the agency through the reach of