The automatic premium loan provision is designed to
Options:
a. provide a source of revenue to the insurance company
b. avoid a policy lapse
c. allow a policyowner to request a policy loan
d. allow a policyowner to take out additional coverage without evidence of insurability
The Correct Answer Is:
- b. avoid a policy lapse
The automatic premium loan provision is designed to avoid a policy lapse. The provision allows the insurance company to continue providing coverage if premiums are not paid on time, ensuring that policyholders have the coverage they need in case of an accident. By automatically enrolling customers in a premium loan plan, the insurance company can ensure they are paying their premiums on time and avoid any lapses in coverage.
Example:
The Department of Veterans Affairs (VA) has announced a new automatic premium loan provision designed to avoid a policy lapse. The VA will now automatically provide premium loans to eligible veterans who have lapsed on their insurance policies. This will help ensure that veterans have the coverage they need, without having to search for or apply for a new policy. This change is expected to make it easier for veterans to remain insured and improve their chances of avoiding a lapse in coverage.