Final answer:
The false statement about the APL provision is that if not repaid, it will not reduce the death benefit, as it indeed will diminish the death benefit by the amount of the loan plus interest just like any other policy loan.The correct option is d.
Step-by-step explanation:
The question pertains to the Automatic Premium Loan (APL) provision found in some life insurance policies. The APL is a feature that allows the insurance company to use the policy's accumulated cash value to pay the premium automatically if the policyholder fails to make a payment. However, like any other loan against the policy's cash value, if not repaid, it will indeed reduce the death benefit by the amount of the premium loan with interest. Therefore, the correct option indicating a false statement regarding the APL provision in a life insurance policy is:
- d. The APL is unlike other policy loans, and if not repaid, it will not reduce the death benefit by the amount of the premium loan with interest.
This statement is incorrect because failure to repay an APL does reduce the death benefit by the amount of the loan plus interest, just like any other policy loan. This provision ensures that a policy does not unintentionally lapse due to nonpayment of premiums, offering a layer of protection for the policyholder's beneficiaries.
The insurance premium is the amount paid, often on a regular basis, for an insurance policy. It guarantees that the policy is active and provides the agreed-upon coverage as stated in the insurance contract.