Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
What does an automatic premium loan (APL) provision in a whole life policy do when a premium is not paid by the end of the grace period?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
An automatic premium loan provision authorizes the insurer to pay an overdue premium by borrowing against the policy's cash value, provided enough cash value is available to cover the loan. This prevents the policy from lapsing when the owner misses a premium. The loan bears interest, and if it, with interest, grows to exceed the cash value, the policy may still lapse. The policyowner can repay the loan to restore the cash value.
Why the other options are wrong
- B) APL does not waive premiums; the premium is still paid, but with borrowed cash value rather than by the owner.
- C) The face amount is not increased to cover unpaid premiums; the cash value backs the loan instead.
- D) The policy is not automatically cancelled; the provision exists precisely to keep the coverage in force.
Memory hook
APL: the cash value writes the premium check when you cannot. Borrow from yourself to keep the death benefit breathing.