Automatic Premium Loan (APL) is a feature offered by many life insurance companies to help policyholders maintain their life insurance coverage in the event that they are unable to pay their premiums.
In the life insurance industry, the payment of premiums is crucial to the maintenance of a policy. If a policyholder fails to pay their premiums on time, their policy may lapse and they will no longer be covered by the policy. This can be a serious problem for those who rely on life insurance coverage to provide for their loved ones in the event of their death.
APL provides a solution to this problem by automatically borrowing the premium amount due from the policy’s cash value if the policyholder misses a premium payment. This loan is made at an interest rate specified in the policy and is used to pay the premium amount due. The policyholder then has a specified period of time to repay the loan with interest.
The use of APL can help ensure that a life insurance policy remains in force even if the policyholder is unable to make a premium payment. It can also help prevent the policy from lapsing, which can result in the loss of valuable coverage and the need to reapply for a new policy, which may be more expensive or difficult to obtain due to changes in health or age.
It is important to note that the use of APL does come with some risks. Policyholders who use APL may incur interest charges on the loan, which can increase over time if the loan is not repaid promptly. Additionally, the use of APL can reduce the policy’s cash value and death benefit, as the loan and interest must be repaid from the policy’s cash value.
Despite these risks, the use of APL can be a valuable tool for policyholders who want to ensure that their life insurance coverage remains in force even if they are unable to make a premium payment. Many life insurance companies offer APL as an optional feature, and policyholders should carefully consider the benefits and risks before deciding whether to include it in their policy.