Automatic Premium Loan Provision

Definition - What does Automatic Premium Loan Provision mean?

An automatic premium loan provision is a clause in a whole life insurance policy. It states that should a policyholder fail to make a scheduled premium payment, money from the accumulated cash value of the policy will be withdrawn and used as a loan to pay the owed premium.

Insuranceopedia explains Automatic Premium Loan Provision

Automatic premium loan provisions are beneficial for both insurers and the insured. They allow the insurer to collect a premium even when the insured cannot pay it, and they allow the insured to keep their policy rather than have it canceled as a result of a missed payment.

Policyholders can miss payments for a variety of reasons. They may, for instance, be sick, injured, or have simply forgotten. As long as they have an automatic premium loan provision, however, a missed premium should not void the policy.

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