Question

If an insured continually uses the automatic premium loan option to pay the policy premium,

A. The cash value will continue to increase.
B. The insurer will increase the premium amount.
C. The policy will terminate when the cash value is reduced to nothing.
D. The face amount of the policy will be reduced by the automatic premium loan amount.

Answer 1

If an insured continually uses the automatic premium loan option, the cash value of the policy will continue to increase. However, the face amount of the policy will not be reduced by the automatic premium loan amount.

Step-by-step explanation:

If an insured continually uses the automatic premium loan option to pay the policy premium, the cash value will continue to increase. When the insured borrows against the policy, the loan from the insurance company must be paid back, plus interest. However, the face amount of the policy will not be reduced by the automatic premium loan amount.