A life insurance nonforfeiture option that allows the insurer to pay overdue premiums on a policy by establishing a loan against the policy’s cash value.
Simply so, at what point would a automatic premium loan be generated?
The automatic premium loan clause is exercised when the premium payments are overdue. The policyholder can choose a scheduled date for regular payments of insurance premiums.
People also ask, what are the types of premium?
Modes of paying insurance premiums:
- Lump sum: Pay the total amount before the insurance coverage starts.
- Monthly: Monthly premiums are paid monthly. …
- Quarterly: Quarterly premiums are paid quarterly (4 times a year). …
- Semi-annually: These premiums are paid twice a year and are way cheaper than monthly premiums.
What is a Nonforfeiture option?
A non-forfeiture option. (or clause) is a provision included in certain life insurance policies stipulating that the policyholder will not forfeit the value of the policy if the policy lapses after a defined period due to missed premium payments.
What is a premium loan?
Definition of premium loan
: a loan made in the amount of and for the purpose of paying a premium due upon a life insurance policy and constituting a lien against the policy.
What is a waiver of premium?
A waiver of premium rider is an insurance policy clause that waives premium payments if the policyholder becomes critically ill, seriously injured, or physically impaired.
What is an example of a premium?
Premium is defined as a reward, or the amount of money that a person pays for insurance. An example of a premium is an end of the year bonus. An example of a premium is a monthly car insurance payment. An amount paid or required, often as an installment payment, for an insurance policy.
What is automatic premium loan AIA?
The APL borrows the outstanding modal premium amount from the policy cash value to pay for premium due and an interest is charged at 8% per annum. As a result of the APL, cash values and bonuses have continued to accrue under the policy. You may wish to refer to your policy contract for details on the APL feature.
What is the automatic premium loan provision activated?
Automatic Premium Loan — an optional provision in life insurance that authorizes the insurer to pay from the cash value any premium due at the end of the grace period. This provision is useful in preventing inadvertent lapse of the policy.
What is the purpose of the automatic premium loan rider quizlet?
The automatic premium loan provision permits the insurer to automatically use the policy cash value to pay an overdue premium.
What is the purpose of the automatic premium loan rider?
An automatic premium loan is often associated with a life insurance policy that has a cash value. It is a specific clause, or rider, within the policy that allows the insurance issuer to withdraw premium payments from the accrued value of the policy when the policyholder is unable to or neglects to continue paying.
What is true about cash surrender Nonforfeiture option?
Cash value surrender is the most basic nonforfeiture option that is available. In this case, you would forfeit your life insurance for the cash value that has built up in the policy. … You would receive the cash value less any fees that you owed, but you would have no death benefit coverage.
Which Nonforfeiture option is the highest amount of insurance protection?
Which nonforfeiture option has the highest amount of insurance protection? The Extended Term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time.
Which of the following is an example of a Nonforfeiture option?
Life insurance policyholders can select one of four nonforfeiture benefit options: the cash surrender value, extended term insurance, loan value, and paid-up insurance. … You can use your accumulated cash value to pay the future premiums (also referred to as an automatic premium loan).