What term describes a life insurance policy's cash value that accumulates based on a variable interest rate?

The term that describes a life insurance policy's cash value accumulating based on a variable interest rate is variable life insurance. This type of policy includes a cash value component that is invested in various investment options, allowing the cash value to grow at varying rates, depending on the performance of the underlying investments. Policyholders have the flexibility to allocate their premiums among different investment accounts, which can lead to increases or decreases in cash value based on market conditions.

In contrast, fixed universal policies typically offer a guaranteed interest rate for the cash value, making them more stable but less potentially lucrative than variable life policies. Term life insurance, on the other hand, does not accumulate cash value at all, as it is designed to provide coverage for a specified term without an investment component. Whole life insurance features a cash value that grows at a predetermined rate, not one that varies with market conditions. Therefore, variable life insurance is the only type that aligns with the description of a cash value accumulating based on a variable interest rate.