Which statement best describes when the automatic premium loan using cash value would occur?

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Study for the Louisiana Series 103 – Life, Health, and Accident or Sickness Insurance Exam. Familiarize yourself with key concepts through engaging questions and explanations. Prepare effectively for your exam!

Multiple Choice

Which statement best describes when the automatic premium loan using cash value would occur?

Explanation:
An automatic premium loan is a feature that uses the policy’s cash value to pay a due premium so the policy doesn’t lapse. It kicks in when a premium is past due and not paid by the end of the grace period. In that moment, the insurer automatically borrows enough from the cash value to cover the premium (often with interest), keeping the policy in force as long as there’s enough cash value to support the loan. It doesn’t happen because of a premium increase, at the policy’s anniversary, or upon surrender.

An automatic premium loan is a feature that uses the policy’s cash value to pay a due premium so the policy doesn’t lapse. It kicks in when a premium is past due and not paid by the end of the grace period. In that moment, the insurer automatically borrows enough from the cash value to cover the premium (often with interest), keeping the policy in force as long as there’s enough cash value to support the loan. It doesn’t happen because of a premium increase, at the policy’s anniversary, or upon surrender.

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