Glossary

Guaranteed interest rate

The lowest rate an insurer promises to credit on cash value or annuity funds for the life of the contract, no matter how far market rates fall.

Also called: minimum guaranteed rate, guaranteed minimum interest rate, guaranteed crediting rate

A guaranteed interest rate is the contractual minimum an insurer must credit to a policy's cash value or a fixed annuity's account, regardless of what the company actually earns. It is written into the contract and can't be lowered once the policy is issued. The insurer may credit more, at its current crediting rate, but never less.

In whole life, the guaranteed rate is built into the guaranteed cash value table rather than shown as a separate credit. In universal life and fixed annuities, it acts as a floor under the declared rate. Say, hypothetically, a universal life policy guarantees 2% and currently credits 4.5%: if rates drop, the insurer can cut the credited rate, but not below 2%. Minimums on new contracts fall when market rates are low, which is why some older policies carry guarantees higher than anything sold today.

The guarantee covers only the interest rate. In universal life, rising cost-of-insurance charges can still drain cash value even at the guaranteed rate, and a policy loan may change what the borrowed portion earns. The guaranteed column of an illustration shows the worst case. See guaranteed vs non-guaranteed values in a policy illustration.

Last reviewed October 4, 2026

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Related terms

Crediting rate The interest rate an insurer applies to the cash value of a universal life policy or the balance of a fixed annuity for a given period. Cash value The savings component that builds inside whole life, universal life and other permanent policies, which the owner can borrow against or withdraw. Guaranteed values The cash values, death benefits and premiums a permanent policy promises in writing, which the insurer can't reduce whatever its results. Universal life insurance Permanent life insurance with flexible premiums and an adjustable death benefit, built on an account credited with interest and charged monthly costs. Fixed annuity An annuity that credits a rate set by the insurer, with principal protected from market losses, either deferring growth or paying fixed income. Non-guaranteed elements Policy features an insurer can change after issue, such as dividends, credited rates and current cost-of-insurance charges, within contract limits.

Related guides

Current-assumption universal life and crediting rates Current-assumption universal life credits interest and charges costs at rates the insurer can change. How crediting rates work and what to watch for. How annuity rates are set and why they move Annuity rates come from an insurer's bond earnings minus costs and profit, plus mortality for income annuities. Why they move with bond yields and competition. How universal life insurance works Universal life splits a permanent policy into a cash account and monthly charges. See how premiums, interest, costs and death benefit options fit together. How interest rates affect life insurance prices Insurers invest premiums in bonds, so long-term rates matter most for lifelong and guaranteed policies and least for level term. How each policy type reacts. Life insurers and the economy: rates, recessions and markets How interest rates, inflation, recessions and market crashes affect life insurers and policyholders, and how insurers in turn fund the economy.