The interest amount that is credited to the insurance policy account of an insured over and above the minimum amount stated in the policy. Broadly, it means any amount in the nature of interest that is paid or credited to a policyholder on account of the insurance policy establishing a relationship between the insured and the insurer.
Excess interest may also imply any excess of interest determined at the prevailing assumed rate for an insurance contract.
In a whole life insurance (specifically, excess interest whole life insurance), it is assumed that the interest earned under the contract will exceed the interest rate guaranteed (minimum stated rate or amount). Excess interest is credited and paid to the policyholder/ policyowner either through the policy dividend structure (in a mutual company type of insurance), or through a policyholder’s cash values or future premiums due (in a stock company type).
