Insurance companies frequently have two or more interest rates that kick in at different levels. For example, the guaranteed interest rate may be 4 percent on the first $500 and 7 percent on balances over $500. With a balance of almost $8,000, the total interest is just under 7 percent. When you’re choosing a policy or company from which to buy your universal life policy, pick the one with the highest guaranteed interest so that your cash value grows most quickly.
The interest earned continues to increase and eventually will equal and then exceed the amount you contribute. At this point, the money you pay is, in effect, going directly into your own account.
The interest rate is calculated daily, so you get compounded interest (interest on your interest). For a policy with an interest rate of 7 percent, the annual percentage rate (APR) is actually more than 8 percent.
The interest earned continues to increase and eventually will equal and then exceed the amount you contribute. At this point, the money you pay is, in effect, going directly into your own account.
The interest rate is calculated daily, so you get compounded interest (interest on your interest). For a policy with an interest rate of 7 percent, the annual percentage rate (APR) is actually more than 8 percent.
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