Although
whole life insurance and universal life insurance both fall into the
category of permanent coverage, the differences between the two lie in
how the cash value accumulates. Under a universal life insurance policy,
the insurance company issuing the policy establishes an interest rate
minimum, stated within each individual contract. Should the insurance
company's portfolio outperform the minimum interest rate, excess
earnings may be applied to the cash value of a policy. The potential to
earn more than the minimum crediting interest rate differentiates
universal life insurance from whole life.
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