Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
The automatic premium loan (APL) provision in a whole life policy is designed to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The automatic premium loan provision authorizes the insurer to advance an overdue premium automatically, using the policy's cash value as collateral, so the policy stays in force instead of lapsing during the grace period. The insurer charges interest on the loan, and any unpaid balance reduces the eventual death benefit. It is a general contract provision under objective LIFE-II.E.7 that protects against unintended lapse.
Why the other options are wrong
- B) The APL draws on the policy's own cash value, not on a bank loan.
- C) The APL keeps the policy in force; it does not reduce the death benefit merely because a payment is late.
- D) The APL does not convert the policy; conversion to term is the extended-term nonforfeiture option, a different provision.
Memory hook
APL: the cash value silently covers the premium so the policy never sleeps.