Which term describes a rate that may not drop below a policy's guaranteed minimum?

Which term describes a rate that may not drop below a policy's guaranteed minimum?

• A. Interest rate guarantees
• B. Fixed annuity
• C. General account
• D. Surrender charge

Answer: (A)

Think about a floor on the interest credited by a contract. When the contract promises the credited rate will never drop below a specified level, that promise is the interest rate guarantee. It ensures the policyholder won’t see returns fall past the guaranteed minimum, even if market rates decline. A fixed annuity is a product that may carry such guarantees, but the term describing the rate itself is the interest rate guarantees; surrender charges relate to early withdrawals, and the general account is simply the insurer’s pool of funds.

Think about a floor on the interest credited by a contract. When the contract promises the credited rate will never drop below a specified level, that promise is the interest rate guarantee. It ensures the policyholder won’t see returns fall past the guaranteed minimum, even if market rates decline. A fixed annuity is a product that may carry such guarantees, but the term describing the rate itself is the interest rate guarantees; surrender charges relate to early withdrawals, and the general account is simply the insurer’s pool of funds.