Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A provision in a whole life policy that uses the policy's cash value to automatically pay a premium if the insured fails to pay it by the end of the grace period is the:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The automatic premium loan (APL) provision authorizes the insurer to automatically borrow from the policy's cash value to pay an unpaid premium at the end of the grace period, keeping the policy in force. The loan accrues interest against the cash value. If the insured does not want this, they must affirmatively decline the APL option. APL prevents unintended lapse but reduces the cash value available to the insured.
Why the other options are wrong
- B) The cash surrender option is a nonforfeiture choice that terminates coverage and pays the net cash value to the owner; it does not keep the policy in force.
- C) Reinstatement revives a policy that has already lapsed, while APL prevents the lapse from occurring in the first place.
- D) A waiver of premium rider waives premiums during the insured's total disability, a different trigger than a missed premium payment.
Memory hook
APL = the cash value pays your premium on autopilot so the policy never lapses.