Re: Life Insurance -Minimum Deposit Plans
This could mean one of two things.
1. Automatic Premium Loan
2. Premium Financing
I say it could mean two things because your original post was a little vague.
Based on the additional comment that you are studying for an insurance license, I'm betting this is number one and not number two as premium financing would not likely appear on the insurance license exam.
We'll tackle both.
Automatic premium loan is a retention provision to prevent policy lapse when a payment is missed. The policy uses a loan from cash value in the policy to satisfy the premium payment and prevent policy lapse.
You'd do this in the event you find money a bit tight in a given month. The policy loan would carry you through to the next month when cash might be more plentiful and you can continue to pay premiums.
Premium financing is an advanced life insurance concept. It's a process of borrowing money to pay for premiums and waiting for cash value in the policy to build and be used to repay the loan. It's not a process for the faint of heart, and requires some substantial networth to even be a candidate. The benefit to the client is a much lower net out of pocket cost to acquire the life insurance coverage, with the ability to retain the cash that is above a beyond the money needed to repay the loan. Again, if you're new, not something you'd expect to be doing anytime soon if even in the next decade of your career, or maybe ever.