What type of interest rate is guaranteed in universal life policies?

In universal life insurance policies, the guaranteed interest rate is specified as the contract interest rate. This rate is set by the insurance company and represents the minimum rate of interest that the policyholder can earn on the cash value of their policy. This guarantee offers policyholders a level of security and predictability regarding their investment within the insurance product.

Policyholders benefit from this guaranteed minimum, as it protects them from fluctuations in the market or changes in economic conditions that could otherwise impact the interest earned on their cash value. Unlike variable or market interest rates that can change based on external economic factors, the contract interest rate remains stable as long as the policy is in force, ensuring that the cash value continues to grow at a minimum rate. Options that imply variability or projection do not provide the same level of assurance that the guaranteed interest rate offers.