State RegulationsOH specificDifficulty 1/5
An insurer in Cleveland writes an individual life policy with a fixed policy-loan interest rate. What is the maximum rate the policy may charge on policy loans?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
ORC 3915.051 caps the policy-loan interest rate for policies issued on or after April 1, 1982 at not more than 8% per annum under the fixed-rate option. Alternatively, the insurer may use an adjustable rate tied to the higher of the Moody's corporate bond yield average from 2 months prior or the policy's cash-surrender rate plus 1%, adjusted at least every 12 months and only by changes of 0.5% or more. A fixed rate above 8% would violate the statute.
Why the other options are wrong
- B) 5% is lower than the actual statutory ceiling; ORC 3915.051 permits up to 8% per annum on the fixed option.
- C) 6% is not the Ohio cap; the fixed-rate ceiling under ORC 3915.051 is 8% per annum.
- D) Ohio does impose a maximum: ORC 3915.051 caps fixed policy-loan rates at 8% per annum or subjects adjustable rates to the statutory formula.
Memory hook
Ohio policy loans top out at 8% — or track Moody's plus 1%.