The Automatic Premium Loan (APL) is the most commonly used of the built-in “Non-Forfeiture Clauses” within a Whole Life insurance policy. The APL ensures that the client’s policy doesn’t lapse or get cancelled, should the client ever come into cash flow difficulties down the road. It may go by a different name at different companies, but this feature can help you in times of cash-flow challenges. By literally recycling existing cash value already in the policy to pay for the premiums, it allows the values inside the policy to keep increasing as if the premiums were paid normally.
It works the same way as taking a regular policy loan, but instead of the money going to you, it goes to the life insurance company to pay the premiums. That is why your cash value can still increase, but so does your outstanding loan balance.
This can work well to alleviate a short term stressful situation, or change in cash flow, but should not be counted on to purely fund a policy over the long term. Eventually, the loan balance can eclipse the total cash values within a policy. And if you have not built up a sufficient cash value, or have borrowed too much money already, these loans may not be available to cover the full amount of premiums, at which time the policy could lapse.