A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called

• A. Term Life
• B. Whole Life
• C. Universal Life
• D. Variable Life

Answer: (C)

This describes universal life. It combines a guaranteed minimum interest credited to the cash value with the possibility of earning more if the insurer’s current credited rate is higher than that minimum. Premiums are flexible and can be adjusted, and the death benefit can often be changed, with the cash value growing based on the credited interest. This differs from term life, which has no cash value; from whole life, which typically guarantees a fixed, set rate with level premiums; and from variable life, where cash value is invested in separate accounts and returns aren’t guaranteed.