Our Experts Explain the Automatic Premium Loan Provision in Life Insurance

Many companies provide an automatic premium loan provision, but the policyowner must in some states actively elect to make the feature operative. When operative, if a premium is unpaid at the end of the grace period and there is sufficient cash value, the policy automatically will advance a loan to pay the premium and prevent lapse. Most companies place no restrictions or limitations on the use of the automatic policy loan provision. However, some companies permit policyowners to use the provision to pay premiums only a limited number of consecutive times before the policy will lapse, even if the cash value is sufficient to continue using loans to pay premiums.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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