Downside protection with caps is a core feature of Indexed Universal Life (IUL) policies that balances safety and growth. When the market declines, your policy is protected by a floor—typically 0%—which means you won’t lose your cash value due to negative index performance. However, in exchange for that protection, your gains are limited by a cap set by the insurance company. For example, if your cap is 10% and the market returns 15%, you would be credited 10% for that period. This structure allows you to participate in market upside while avoiding losses, making it a strategic option for those who want growth potential without full exposure to market volatility.