Guaranteed Interest Rate
What Does Guaranteed Interest Rate Mean?
A guaranteed interest rate is an interest rate that is guaranteed not to fluctuate beyond a specified limit.
In the context of insurance, many life insurance companies offer investment options with guaranteed interest rates. When a life insurance company provides such an option, the policyholder can be confident that the interest rate will remain within the specified range.
Insuranceopedia Explains Guaranteed Interest Rate
If an interest rate is not guaranteed, there is always the risk that it could change. A change in the interest rate on an investment vehicle could result in the investor earning significantly less money.
For example, if an investment vehicle offers an interest rate of 10 percent, and it suddenly drops to 5 percent, the investor could lose a substantial amount of money. For this reason, many life insurance policyholders prefer guaranteed interest rates to ensure stability and minimize risk.
