What type of life insurance policy guarantees a minimum interest rate with the potential to earn a higher credited rate?

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

Answer: (B)

Universal life is designed to accumulate cash value with interest credits. It guarantees a minimum interest rate on that cash value, while also allowing a higher credited rate if the insurer’s current rate is favorable. This setup gives you a floor on growth plus upside if market conditions support a higher credit. Term life has no cash value to credit interest. Whole life does build cash value and may pay dividends, but those dividends aren’t described as a current rate that can exceed a guaranteed minimum in the same way. Variable life ties cash value to investments with potential for higher returns but no guaranteed minimum rate.