The maximum interest rate for adjustable-rate policy loans is based on which index?

The maximum interest rate for adjustable-rate policy loans is based on which index?

• A. The Prime Rate.
• B. The Consumer Price Index.
• C. Moody's corporate bond yield average.
• D. LIBOR.

Answer: (C)

Policy loan rates for adjustable-rate life insurance loans are tied to Moody's Corporate Bond Yield Average. This index reflects long-term debt costs in the corporate bond market, which aligns with the long horizon of policy loans and provides a stable benchmark for setting loan rates. The other options serve different purposes: Prime Rate is tied to consumer and business bank lending, CPI measures inflation rather than borrowing costs, and LIBOR is an interbank rate used for short-term funding and many financial derivatives. Therefore, Moody's corporate bond yield average best captures the benchmark for these policy loans.

Policy loan rates for adjustable-rate life insurance loans are tied to Moody's Corporate Bond Yield Average. This index reflects long-term debt costs in the corporate bond market, which aligns with the long horizon of policy loans and provides a stable benchmark for setting loan rates. The other options serve different purposes: Prime Rate is tied to consumer and business bank lending, CPI measures inflation rather than borrowing costs, and LIBOR is an interbank rate used for short-term funding and many financial derivatives. Therefore, Moody's corporate bond yield average best captures the benchmark for these policy loans.