Tennessee Life Producer Practice Exam

The purpose of the Automatic Premium Loan Provision is to avoid a policy lapse. This provision automatically borrows from the policy's cash value to pay the premium if the policyholder fails to make the premium payment by the end of the grace period. This is particularly important because if a policy lapses due to non-payment, the policyholder would lose coverage and a potential death benefit. By utilizing the Automatic Premium Loan Provision, the insurance company ensures that the policy remains in force without requiring additional action from the policyholder, thus protecting their interests and maintaining the policy's benefits.