Which provision prevents the policy from lapsing due to nonpayment of the premium?

Which provision prevents the policy from lapsing due to nonpayment of the premium?

• A. Automatic premium loans
• B. Waiver of premium rider
• C. Disability income
• D. Accidental death rider

Answer: (A)

The key idea is how some policies stay in force when a premium isn’t paid: an automatic premium loan uses the policy’s cash value to cover the overdue premium. If there’s enough cash value, the insurer automatically advances a loan equal to the missed premium, so the policy doesn’t lapse. This keeps the coverage in effect as long as the loan and its interest don’t exhaust the cash value. If the cash value runs out, the policy can lapse or become a reduced paid-up policy, depending on terms. Waiver of premium would only keep the policy in force if the insured is disabled and eligible for premium waivers; it doesn’t automatically pay overdue premiums when that condition isn’t met. Disability income provides benefits for disability but doesn’t prevent lapse due to nonpayment, and accidental death rider adds a benefit on death from an accident, not premium protection.

The key idea is how some policies stay in force when a premium isn’t paid: an automatic premium loan uses the policy’s cash value to cover the overdue premium. If there’s enough cash value, the insurer automatically advances a loan equal to the missed premium, so the policy doesn’t lapse. This keeps the coverage in effect as long as the loan and its interest don’t exhaust the cash value. If the cash value runs out, the policy can lapse or become a reduced paid-up policy, depending on terms.

Waiver of premium would only keep the policy in force if the insured is disabled and eligible for premium waivers; it doesn’t automatically pay overdue premiums when that condition isn’t met. Disability income provides benefits for disability but doesn’t prevent lapse due to nonpayment, and accidental death rider adds a benefit on death from an accident, not premium protection.