What type of life insurance policy is known for having falling interest rates and requires higher premiums to avoid termination?

The type of life insurance policy characterized by falling interest rates and the necessity of higher premiums to prevent termination is Universal Life insurance. This policy combines a flexible premium payment structure with a cash value component that earns interest.

In a Universal Life policy, the cash value grows at an interest rate that is typically tied to current market rates, which can fluctuate and potentially fall. As interest rates decrease, the cash value does not grow as expected, which can affect the policy's ability to sustain itself. Additionally, if the cash value becomes insufficient to cover the cost of insurance due to lower interest earnings, the policyholder is required to increase premium payments to keep the policy in force. This structure emphasizes the need for policyholders to manage their premiums carefully in response to changing interest rates to avoid the risk of termination.

In contrast, other types of policies, such as Variable Universal Life, Whole Life, and Term Life, have different characteristics and structures that do not specifically reflect vulnerability to falling interest rates in this way. Whole Life has fixed premiums and guaranteed cash values, while Term Life provides coverage for a limited period, and Variable Universal Life allows for investment options but also has its mechanisms to deal with interest fluctuations that differ significantly from Basic Universal Life.