L&HIllinoismedium
Under 215 ILCS 5/229.5, what governs the maximum interest rate an Illinois insurer may charge on a policy loan secured by a life insurance policy's cash value?
AThe insurer may charge any rate disclosed in the application
BThe rate is fixed by statute at 6% simple interest
CThe rate is set monthly by the IL Attorney General
The rate is capped at the maximum permitted under 215 ILCS 5/229.5 (either a fixed statutory cap or an adjustable rate tied to Moody's Corporate Bond Yield Average)
Why this is the answer
215 ILCS 5/229.5 caps the interest an Illinois insurer may charge on a policy loan. The insurer must elect, at policy issue, either a fixed maximum rate (historically 8% per annum) or an adjustable rate tied to Moody's Corporate Bond Yield Average — Monthly Average Corporates. The chosen method must be disclosed and applied uniformly; the IL Department of Insurance enforces compliance.
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