Life Policy ProvisionsQuestion 567 of 716
The automatic premium loan provision prevents a policy from lapsing by:
a.Converting the policy to extended term insurance as soon as a premium is missed
b.Automatically borrowing from the available cash value to pay an overdue premium
c.Reducing the face amount to zero until the owner resumes paying premiums
d.Canceling any interest owed on prior policy loans so the premium can be paid
Explanation
The automatic premium loan quietly borrows against the cash value to cover a premium the owner failed to pay, avoiding a lapse. It does not zero out the face amount, forgive loan interest, or convert the policy.
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Related questions on this topic
- A cost-of-living (COLA) rider on a life policy increases the:
- Under the extended term nonforfeiture option, the policy's cash value is used to:
- The reduced paid-up nonforfeiture option provides:
- When a policyowner requests a cash-value loan, the insurer:
- Policy dividends from a participating life policy are generally not taxable because they are treated as:
- Electing to use policy dividends to buy paid-up additions will:
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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)