Which type of interest rate is often not guaranteed in a life insurance contract but may be influenced by market conditions?

The current interest rate is often not guaranteed in a life insurance contract and can be influenced by market conditions. Unlike some other types of interest rates, which may be fixed or predetermined, the current interest rate fluctuates in response to changes in the economic environment and interest rates available in the broader market.

In life insurance policies, particularly those related to cash value products like whole life or universal life insurance, the current interest rate can vary from year to year based on the insurer’s investment performance and prevailing economic factors. Because policyholders might see variations in the cash value growth, understanding current interest rates helps them grasp how their policies will perform over time.

On the other hand, fixed interest rates and contract interest rates ensure consistent earnings that are predetermined, providing a sense of stability. Variable interest rates are also driven by market conditions but often apply to investment-type products and can fluctuate significantly based on investment performance.