How Do You Spell AUTOMATIC PREMIUM LOAN CLAUSE?

The term "Automatic Premium Loan Clause" refers to a provision in an insurance policy that allows the insurer to automatically pay the premium on behalf of the policyholder in the event that they fail to make the required payment. This clause is typically found in life insurance policies.

Under the Automatic Premium Loan Clause, if the policyholder fails to pay their premium on time, the insurer has the right to borrow the amount due from the cash value of the policy. The policyholder's cash value acts as collateral for this loan. The borrowed amount is then used to pay the premium on the policy, effectively keeping the policy in force.

This clause is beneficial for policyholders who may have missed a premium payment due to forgetfulness or financial constraints. It ensures that the policy remains active even if the premium is not paid promptly, preventing the policy from lapsing or being terminated.

It is important to note that the loan amount borrowed, including any accumulated interest, will be deducted from the policy's death benefit if it is not repaid while the policyholder is alive. Additionally, the Automatic Premium Loan Clause may have specific terms and conditions regarding the maximum loan amount, interest rate, and repayment schedule, which should be reviewed carefully by the policyholder.