Which type of life insurance is subject to a contract interest rate?

Universal life insurance is subject to a contract interest rate because it is designed to provide flexible premiums and benefits, combined with a cash value component that earns interest. This interest is typically credited based on a declared rate by the insurer, which can vary but is generally guaranteed to stay within certain limits outlined in the policy.

This characteristic of universal life insurance allows policyholders to accumulate cash value over time, as the interest earned on the cash value can enhance the overall growth of the policy. Additionally, the flexibility in premium payments allows the policyholder to adjust their contributions to the policy, but the growth of the cash value remains linked to the insurer's prescribed interest rate.

In contrast, other types of life insurance, such as term life, are purely focused on providing a death benefit without a cash value or interest component. Group life insurance typically provides a straightforward death benefit for a group of people and does not contain an interest-bearing cash value. Adjustable life combines features of both term and whole life insurance but does not specifically focus on the generation of interest rates as a primary feature like universal life does.