What is the key feature of interest-sensitive life insurance policies?

Interest-sensitive life insurance policies are characterized primarily by their ability to adjust the cash value and death benefit based on current interest rates or investment performance. This means that the policyholder can benefit from potentially higher returns on their cash value when interest rates rise, providing a dynamic aspect that aligns with market conditions.

This feature allows policyholders to participate in the investment performance indirectly, which can lead to a higher cash value over time compared to traditional whole life policies that rely on fixed premiums and guaranteed cash values. Thus, the availability of investment options that can affect the overall performance of the policy is a defining element of interest-sensitive life insurance, setting it apart from other types of life insurance that do not offer such flexibility or potential for increased returns.