LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
The 'automatic premium loan' (APL) provision:
- ACancels the policy at the end of the grace period and pays the cash value to the owner as a refund
- Pays an overdue premium from the cash value at the end of the grace period, keeping the policy in force as a loan
- CWaives the overdue premium permanently, since the cash value has already funded the insurer's reserve
- DApplies to term insurance, so a lapsed term policy is automatically restored when the owner resumes payment of the premium
Correct answer: B) Pays an overdue premium from the cash value at the end of the grace period, keeping the policy in force as a loan
APL prevents inadvertent lapse in cash-value policies. Loans accrue interest and reduce benefits.
Why the other options are wrong
- AIt keeps the policy in force.
- CIt is a loan, not a waiver.
- DTerm has no cash value to lend against.
Exam tip
APL = cash value pays the premium as a loan.
Common mistake
Assuming APL is free.
What this tests
CISRO competency component 1.3 — Integrate into practice the legal aspects of insurance and annuity contracts — which is weighted at 60% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 1
- An 'assignee' of a life insurance policy is:
- A corporation as policyowner and beneficiary of a policy on a key employee:
- A 'trustee' named to receive proceeds on behalf of a beneficiary:
- A life insurance contract 'matures' when:
- The 'assignment' provision typically states that:
- The 'personal representative' (executor or administrator) of a deceased owner:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.