Automatic Premium Loan Provision

Automatic Premium Loan Provision

In some whole life insurance policies, a clause providing for a loan from the policy's cash value in the event the policyholder does not pay the premium. The automatic premium loan provision mandates the payment of the premium with this loan in order to prevent the lapse of the policy.
References in periodicals archive ?
There is a downside to the automatic premium loan when abused; "the automatic premium loan provision makes it too easy for the insured to avoid the payment of premium in cash.
The terms of the automatic premium loan provision usually give the insurer the right to change the frequency of premium payments.
Many companies provide an automatic premium loan provision, but the policyowner must in some states actively elect to make the feature operative.
In contrast, unless an AL policyowner officially requests a change in the premium payment plan, skipping premium payments will either cause the policy to lapse or trigger policy loans under the automatic premium loan provision.
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