What type of life insurance policy guarantees a minimum interest rate while allowing for potentially higher earnings?

The type of life insurance policy that guarantees a minimum interest rate while allowing for potentially higher earnings is universal life insurance. This policy is designed to provide flexible premiums and death benefits while also offering a cash value component that accumulates interest. The minimum interest rate ensures that the cash value will grow over time, regardless of market conditions, which provides a level of security for policyholders.

Furthermore, universal life insurance often allows policyholders to adjust their premiums and death benefits according to their financial needs, which can also lead to higher potential earnings if the invested portion of the cash value performs well. This flexibility, combined with the minimum guaranteed interest, makes universal life a unique option for those looking for both security and growth potential.

In contrast, term life policies offer pure life insurance protection without any cash value component, while whole life provides a fixed premium and guaranteed cash value but does not allow for variations in interest based on market performance. Variable life insurance, on the other hand, invests the cash value in various investment options, which can lead to higher returns but also comes with the risk of losses, meaning it does not guarantee a minimum interest rate.