Question

Interest sensitive whole life policies utilize changing interest rates for which of the following purposes?

A. To determine policy settlement options
B. To arrive at future premium rates
C. To determine the death benefit amount
D. To determine policy cash values

Answer 1

Interest sensitive whole life policies utilize changing interest rates primarily to determine policy cash values.

Step-by-step explanation:

Interest sensitive whole life policies utilize changing interest rates primarily to determine policy cash values. The cash value of a whole life policy increases or decreases based on the interest rates. For example, if interest rates are high, the cash value of the policy will increase at a faster rate, whereas if interest rates are low, the cash value will grow more slowly.

Additionally, policy cash values can be borrowed against or used as collateral, so it's important for the policyholder to understand how the changing interest rates can impact the value and flexibility of the policy.