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Automatic Premium Loan Definition

By Hafsa Binte Omar

An automatic premium loan is a type of insurance policy feature that allows the policyholder to borrow money against the cash value of their life insurance. The money borrowed through an automatic premium loan is then paid back with interest to the life insurance company in installments.

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automatic premium loan provision
  • Source: Google.

    • What is an automatic premium loan?

    An automatic premium loan is a type of insurance policy feature that allows the policyholder to borrow money against the cash value of their life insurance. The money borrowed through an automatic premium loan is then paid back with interest to the life insurance company in installments.

    What are some benefits of taking out an automatic premium loan?

    An automatic premium loan has some unique benefits such as avoiding potential lapses in coverage due to missed payments, helping build more substantial cash values, and offering tax-deferred growth for cash values.

    Are there limits on how much you can borrow with an Automatic Premium Loan?

    Yes, most Life Insurers will only allow you to borrow up to certain limits with an Automatic Premium Loan, usually between 85–95% of your Account Value.

    Conclusion:
    Automatic premium loans provide financial protection and assistance for those who need short-term access to their own funds. Understanding how these loans work helps individuals make informed decisions about their particular policies and capitalize on all available financial resources.

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    Hafsa Binte Omar

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