What Is Another Name for Interest Sensitive Whole Life Insurance?
What Is Another Name for Interest Sensitive Whole Life Insurance?
As we mentioned above, you may see references to similar policies called “current assumption whole life” or “fixed premium universal life.”
Current Assumption Whole Life | Indeterminate Premium Whole Life
These types of whole life policies are similar to an interest-sensitive policy, but have differences in terms of the monthly payment and, sometimes, the death benefit amounts. In a typical whole life policy, both of those are locked in when you buy the policy – they will not change.
But with a current assumption or indeterminate premium whole life policy, those elements will be recalculated at specific points during the policy. Some insurers will recalculate yearly, every couple years, or every five years. At that time, your monthly payment might change based on the current cost of insurance. Some insurers may give you options to reduce your coverage, but that’s mostly reserved for the policy type we’ll cover below (universal life).
Fixed Premium Universal Life
Any policy type with “universal” in the name is going to be interest-sensitive. In this case, “interest sensitive” means the exact same thing we described above – your cash value earns a flat, guaranteed rate of interest with the chance to earn more based on higher interest rates that become periodically available if economic conditions are right.
However, with a traditional universal policy, you don’t have set monthly payment amounts. You have the flexibility to change those as needed, as long as you pay the minimum to keep your policy active. So a universal life policy with fixed premiums ends up being almost the same thing as an interest sensitive whole life policy. That’s why you’ll see them confused online a lot. One key difference is that universal policies let you change the amount of the death benefit over time, which whole life policies do not allow. So if you like the idea of an interest-sensitive policy, you just need to decide whether you want flexible payments and death benefit (universal life) or you want to lock those in place (whole life). That decision will determine which policy type is right for you.
