What Does Guaranteed Interest Rate Mean?
A guaranteed interest rate is an interest rate that a certain party ensures will not fluctuate beyond a certain point.
In the context of insurance, many life insurance companies offer investment vehicles with insurance rates. When a life insurance company provides an investment option with a guaranteed interest rate, the policyholder will know that the interest rate will stay within the provided range.
Insuranceopedia Explains Guaranteed Interest Rate
If an interest rate is not guaranteed, then there is always the possibility that it could change. If the interest rate on an investment vehicle changes, then it means that the investor could end up making significantly less money.
For example, if a particular investment vehicles an interest rate of 10 percent, and it suddenly drops to five percent, then the investor would lose a significant amount of money. For this reason, many life insurance policyholders prefer guaranteed interest rates.