An FIA cap is the maximum interest rate that can be credited for a given segment and period under a capped strategy. If the reference index return exceeds the cap, credited interest is limited to the cap. Insurers reset caps periodically based on hedging costs, interest rates, and volatility. Caps Interact with other levers (participation rates and spreads) to shape potential accumulation;understanding cap behavior is essential for realistic projections.

Annual reviews check cap resets and may reallocate to strategies with more attractive limits.Advisors set expectations that caps move with hedging costs and rates, shaping long-term projections used in retirement income planning.