What determines the current interest rate paid to the cash value account in a universal life policy?

In a universal life insurance policy, the interest rate that is credited to the cash value is determined by the greater of the guaranteed interest rate or the current interest rate offered by the insurer. This structure allows policyholders to benefit from potential higher earnings when market conditions are favorable, while still having a safety net through the guaranteed minimum interest rate.

The guaranteed interest rate ensures that the cash value will not drop below a certain level, providing policyholders with a level of security. At the same time, if the insurer's current interest offerings exceed this guaranteed rate, policyholders can enjoy the benefits of a higher return on their cash value account. This mechanism is designed to balance potential growth with a level of protection against low returns, which is a key feature of universal life policies.

In contrast, options related to investment portfolio performance, the age of the insured, or the type of insurance plan do not directly influence the interest rate paid to the cash value account in the way that the guaranteed and current interest rate comparison does.