Automatic Premium Loan
An automatic premium loan (APL) is a provision in many whole life insurance policies where the carrier automatically pays an overdue premium by creating a policy loan against the policy's cash value. This prevents the policy from lapsing when a premium is not paid within the grace period.
When an APL is triggered:
- The carrier creates a new policy loan equal to the overdue premium amount
- The loan is charged at the carrier's standard policy loan rate
- Interest on this loan capitalizes (adds to the loan balance) just like any other policy loan
- The policy remains in force as if the premium had been paid directly
The APL provision is a safety net — it keeps the policy active and preserves the death benefit and cash value growth. However, because it increases the loan balance, it also reduces the net cash value and the net death benefit.
Not all policies include an APL provision, and on some policies it must be elected when the policy is issued. Check your policy contract or contact your carrier to confirm whether APL is active on your policy.
In Policy Stack, if an APL is triggered, record it as a policy-loan draw with a note indicating it originated from an automatic premium loan. This keeps your loan tracking accurate.
Related terms: Grace Period, Policy Loan, Capitalized Interest, Loan Balance