Automatic Premium Loan Provision
What Does Automatic Premium Loan Provision Mean?
An automatic premium loan provision is a clause in a whole life insurance policy. It stipulates that if a policyholder fails to make a scheduled premium payment, funds from the policy’s accumulated cash value will be withdrawn and used as a loan to cover the owed premium.
Insuranceopedia Explains Automatic Premium Loan Provision
Automatic premium loan provisions benefit both insurers and policyholders. They enable the insurer to collect a premium even when the policyholder is unable to make a payment, while also allowing the policyholder to maintain their coverage instead of having the policy canceled due to a missed payment.
Policyholders may miss payments for various reasons, such as illness, injury, or simple forgetfulness. However, as long as the policy includes an automatic premium loan provision, a missed premium should not result in the policy being voided.
