What happens when a policyholder fails to pay their premium on time and has APL?

When a policyholder has an Automatic Premium Loan (APL) feature in their policy and fails to pay their premium on time, the cash value of the policy is used to cover the premium automatically. APL is designed to prevent the policy from lapsing due to missed premium payments.

This feature allows the insurer to take out a loan against the policy's cash value to cover the unpaid premium, ensuring that the coverage remains in force even if the policyholder forgets or is unable to pay the premium on the due date. While this results in the policy being active, it also means that the amount borrowed will decrease the cash value and the death benefit until it is repaid, potentially making it a financial consideration for the policyholder in the future.

In contrast, the other scenarios involve more immediate or severe consequences that would occur without an APL, such as immediate cancellation or lapsing of the policy, which would not apply here due to the protective nature of APL.