What happens if the policy owner with an automatic premium loan provision dies before repaying the loan?

If the policy owner with an automatic premium loan provision dies before repaying the loan, the balance of the loan will indeed be deducted from the death benefit. This means that the amount that is owed on the automatic premium loan reduces the total value of the death benefit that the beneficiaries receive.

The automatic premium loan provision allows a policyholder to borrow against the cash value of their life insurance policy to pay premiums if they miss a payment. If the loan is not repaid by the time of the policy owner's death, the insurer will calculate the outstanding loan balance and subtract it from the death benefit that would otherwise be payable to the beneficiaries.

In contrast, the other options do not accurately reflect the standard practices in insurance policies with automatic premium loans. The policy is not rendered null and void simply due to an unpaid loan, nor is the loan balance forgiven; it must be accounted for. Additionally, the beneficiaries are not required to pay any remaining loan amount out of their own pockets, as the insurance company handles the deduction directly from the death benefit.