Automatic Premium Loan (APL) is a policy provision that...

Automatic Premium Loan (APL) is a policy provision that...

• A. Allows automatic borrowing from the cash value to cover a premium payment.
• B. Waives premiums after lapse.
• C. Increases the death benefit when a premium is paid late.
• D. Grants a loan to the policyholder on request.

Answer: (A)

Automatic Premium Loan uses the policy’s cash value to cover a missed premium by automatically borrowing against that cash value to pay the premium. This helps keep the policy from lapsing without the policy owner's action, as long as there’s enough cash value to support the loan and it doesn’t exhaust the value. Interest accrues on the loan, and when the loan balance remains outstanding, it reduces the cash value and can reduce the death benefit payable later. This is different from a standard policy loan, which requires the owner to request it. That’s why the correct description is the one that states it automatically borrows from the cash value to pay the premium. The other options describe waivers, changes to the death benefit caused by late payment, or a general loan on request, none of which capture the automatic premium-coverage function.

Automatic Premium Loan uses the policy’s cash value to cover a missed premium by automatically borrowing against that cash value to pay the premium. This helps keep the policy from lapsing without the policy owner's action, as long as there’s enough cash value to support the loan and it doesn’t exhaust the value. Interest accrues on the loan, and when the loan balance remains outstanding, it reduces the cash value and can reduce the death benefit payable later. This is different from a standard policy loan, which requires the owner to request it. That’s why the correct description is the one that states it automatically borrows from the cash value to pay the premium. The other options describe waivers, changes to the death benefit caused by late payment, or a general loan on request, none of which capture the automatic premium-coverage function.