A life insurance policy with a guaranteed interest rate and the chance for a higher rate is called what?

A life insurance policy with a guaranteed interest rate and the potential for a higher rate is classified as universal life insurance. This type of policy is designed to provide both flexibility and the prospect of increased cash value growth over time.

Universal life insurance combines the features of both whole life and term insurance, offering a death benefit along with a cash value component that earns interest. The guaranteed interest rate ensures that the cash value will grow even in less favorable market conditions, while the opportunity for a higher interest rate allows for potential growth if the performance of the underlying investments is favorable.

Whole life insurance, on the other hand, typically offers a fixed premium and a guaranteed cash value growth that does not include the option for higher interest rates based on market performance. Group life insurance is primarily employer-sponsored and doesn't inherently provide a cash value component. Credit life insurance is intended to pay off a specific debt in the event of the borrower’s death, without any savings or cash accumulation features found in universal life policies. Therefore, the characteristics of universal life insurance are what define it as having a guaranteed interest rate alongside the potential for additional growth.