What type of whole life policy has premiums that vary based on the insurer's assumptions?

The selected answer is correct because interest-sensitive whole life policies are designed to have premiums that can fluctuate based on the insurer's assumptions about factors such as investment performance, interest rates, and mortality costs. This type of policy allows policyholders to benefit from more favorable interest rates when the insurer earns higher returns on its investments, which can lead to lower premiums or increased cash value accumulation.

In contrast, traditional whole life policies feature fixed premiums for the life of the policy, ensuring predictability but lacking the flexibility associated with interest-sensitive policies. Variable whole life policies, on the other hand, allow for investment choices but typically do not involve variable premiums directly tied to the insurer's assumptions; rather, they involve variable cash values and death benefits depending on the performance of the selected investment options. Lastly, universal life policies offer flexible premium payments and death benefits, but they are generally more associated with interest accrual options rather than fluctuating premiums based on assumptions.