What happens to the cash value in a universal life insurance policy during inflationary times?

The cash value in a universal life insurance policy is designed to grow based on the current interest rates. This feature offers the potential for the cash value to increase over time, even during inflationary periods. As inflation occurs, the interest credits applied to the cash value can be adjusted in relation to prevailing market conditions and interest rates. This means that policyholders may see the cash value grow in response to rising interest rates, helping to counterbalance the effects of inflation on their investment.

While some policies have guarantees, universal life insurance is flexible, allowing for adjustments based on the insurer's performance; thus, having interest growth based on current rates is a critical aspect of its appeal.