In a life insurance policy, what effect does non-payment of premium have on the automatic premium loan provision?

The automatic premium loan provision is a feature in a life insurance policy that typically allows the insurer to automatically borrow the premium amount due from the policy's cash value if the premium is not paid by the due date. This ensures that the policy remains in force as long as there is sufficient cash value available to cover the premium payment.

When a policyholder fails to pay their premium and there is insufficient cash value to facilitate this automatic borrowing, the provision may lapse. Consequently, the insurance coverage may terminate, leaving the policyholder without protection. Therefore, if the premium remains unpaid and the cash value is inadequate to sustain the policy through the automatic premium loan, the provision loses its effectiveness, and the policy may ultimately lapse.

In this context, the correct answer highlights a significant aspect of how non-payment influences the policy's active status through the automatic premium loan mechanism.