LLQP Life Insurance · Component 2.1 · 30% of the exam
An automatic premium loan provision in a whole life policy:
- Uses the cash value to pay an overdue premium automatically, keeping the policy in force as a loan
- BCancels the policy when a premium is missed, so that the cash value is paid out to the owner rather than lost
- CConverts the policy to term insurance for the balance of the year, so that coverage continues without cash value
- DLends money to the policyholder for any purpose, up to the cash value, whenever a premium notice is issued
Correct answer: A) Uses the cash value to pay an overdue premium automatically, keeping the policy in force as a loan
APL is a non-forfeiture provision: rather than lapsing, the policy borrows from its own cash value to pay the premium, with interest. It preserves the full face amount as long as cash value remains, but the loan reduces the death benefit if unpaid.
Why the other options are wrong
- BAPL exists to prevent lapse, not to cause it.
- CAPL does not convert the policy; the contract continues with a loan against it.
- DAPL is limited to paying overdue premiums.
Exam tip
APL keeps the full face amount in force by borrowing from cash value — but the loan and interest reduce the death benefit until repaid.
Common mistake
Assuming APL is free; interest accrues on the loan.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Life Insurance module. Written against the published curriculum.
More from component 2
- A client has a need lasting about twenty years and compares a ten-year and a twenty-year term policy. The main point to explain is that:
- A client exercises the conversion privilege on his term policy. The permanent premium will be based on:
- A client notices that a small policy costs proportionately more per unit of coverage than a larger one. The explanation is that:
- A client wants to pay monthly rather than annually. The agent should explain that monthly payment:
- A client asks why dividends from her participating policy are not taxed like interest from a bank. The reason is that a dividend is:
- A universal life policyholder is choosing among the investment options inside her policy. She should understand that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.