Final answer:
The interest-sensitive portion of a Universal Life Insurance flexible premium policy is the part where interest rates affect how the cash value of the policy accumulates, with the potential to earn more interest when market rates are high.
Step-by-step explanation:
The interest-sensitive portion of a Flexible Premium Policy in Universal Life Insurance refers to the component of the policy where interest rates affect the cash value accumulation. In essence, the insurance company will credit your account with an interest rate that is sensitive to the current market rates.
The premiums paid into a universal life policy are flexible and after the deduction of policy charges, the remaining money is credited to the cash value of the policy. Universal Life Insurance accounts typically have a minimum guaranteed interest rate, but if the insurers' portfolio earns more, the additional interest may also be credited to your account. This feature allows policyholders to potentially benefit from higher interest rates, although the opposite is also true; if rates fall, the interest credited to the policy will decrease correspondingly.