Automatic Premium Loan

Automatic Premium Loan

loan  

Most policies today contain an automatic premium loan provision. A typical provision reads as follows:A premium loan shall be automatically granted to pay a premium in default. A premium for any other frequency permitted by this policy shall be loaned whenever the loan value, less any indebtedness, is sufficient for such premium but is insufficient for a loan of the premium in default. A revocation or reinstatement of this provision shall be made by written notice filed at the Home Office. If this provision is included in the contract and the
insured does not pay the premium on the due date, the company automatically will pay the premium and charge it against the cash value of the policy.
      The loan will bear interest at the rate applicable to policy
loans as stipulated in the contract. The effect of the provision is to extend the original face amount of
the insurance, decreased by the amount of the loan plus interest, for as long as the remaining cash value is sufficient to permit the advance of an additional premium. This provision may be very beneficial for the policyholder, particularly for one who forgets to pay the premium within the grace period or one
who cannot pay the current premium because of financial difficulties. The most important