With decreasing interest rates in the past few years, universal life products were forced to reduce their crediting interest rates. Since the recent Fed’s hint of “tapering”, risk of increasing interest rates spooked the bond market.
Realistically speaking, rising interest rate is bad for most insurance products. your whole life policy, your endowment and your annuities all suffer due to strong sell off of the underlying bonds, at least in short term.
However, AIA chooses to increase their crediting interest rate from current 4.0% to 4.2% for their Platinum Legacy Plan now. This is because universal life operates in a different manner from traditional life insurance products. the return is largely determined by the underlying “tranches”.
If you would like to understand more about such products, please feel free to contact me. The promotion is till 30 Aug or when the tranche limit is reach.