Readers ask: Which Life Insurance Policy Would Be Eligible To Include An Automatic Premium Loan Provision?


What is a automatic premium loan provision?

An automatic premium loan is an insurance policy provision that allows the insurer to deduct the amount of an outstanding premium from the value of the policy when the premium is due.

Which of the following best describes the automatic premium loan provision of a life insurance policy?

The automatic premium loan provision is best described by the following: The automatic premium loan provision uses the policy’s cash value to pay premiums so the policy does not lapse due to nonpayment of premiums. The policyholder can expect a full refund if the policy is returned within the specified time.

Which policy may not have the automatic premium loan provision attached to it?

Because universal life policies will always deduct policy expenses from available cash value, they do not have an automatic premium loan feature. Whole life insurance policies will never automatically take policy cash values to pay the premium due, so the APL feature is the way to effectively accomplish this goal.

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At what point would an automatic premium loan be generated?

Automatic premium loans can be borrowed only if the policy’s cash value is equal to or more than the overdue premium amount.

What is the premium of a loan?

A premium on a loan is an additional fee paid by one party to entice the other to enter the agreement. Typically, a premium is charged by a lender when the borrower poses a substantial default risk.

What is a waiver of premium?

A waiver of premium rider is an optional insurance policy clause that waives insurance premium payments if the policyholder becomes critically ill or disabled. To purchase a waiver of premium rider you may need to meet certain requirements for age and health.

What is a policy loan provision?

Under the policy loan provision, a permanent life insurance policy may be borrowed against, using the policy’s cash value as collateral. The cash value can also be pledged as security to obtain loans from other sources. Older policies still in force stipulate a flat rate of interest, such as 5-8%.

Which of the following best describes the purpose of the Incontestability provision?

Which of the following best describes the purpose of the incontestability provision? The incontestability provision allows the insurer to contest any misstatement, omission or concealment made in the application.

Which Nonforfeiture option is the highest amount protection?

Which nonforfeiture option has the highest amount of insurance protection? The Extended Term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time.

What is the purpose of the automatic premium loan rider?

An automatic premium loan is often associated with a life insurance policy that has a cash value. It is a specific clause, or rider, within the policy that allows the insurance issuer to withdraw premium payments from the accrued value of the policy when the policyholder is unable to or neglects to continue paying.

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What automatic premium loan is as a non forfeiture option?

A life insurance nonforfeiture option that allows the insurer to pay overdue premiums on a policy by establishing a loan against the policy’s cash value.

What is an accelerated benefit rider?

A: The accelerated benefits option or rider in a life insurance policy provides that all — or a portion of — the policy’s proceeds will be paid to the insured upon the occurrence of specified events. A: These options are usually added to universal life insurance policies or other permanent life insurance policies.

What is the waiting period on a waiver of premium?

What is the normal waiting period for premiums to be waived? There is usually a waiting period of 3 or 6 months once the policy owner becomes disabled before the first premium will be waived.

When can a lapsed life insurance policy be reinstated?

A life insurance policy may typically be reinstated within 30 days of a lapse without additional paperwork, underwriting, or attestations of health. Insureds often pay a reinstatement premium, which is larger than the original premium.

What kind of premium does a whole life policy have?

Whole life insurance policies have a fixed premium, meaning you need to pay the same amount each year. Whole life insurance also provides steady, fixed growth on your cash value.

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