When you need urgent funds, one option many policyholders consider is borrowing against their life insurance policy. Insurance loans are quick, collateralised, and often cheaper than unsecured loans. However, you may wonder whether to take a loan directly against your LIC policy or explore a loan against insurance policy through other insurers or NBFCs.
Get quick liquidity by pledging your policy. Apply for a loan against insurance policy in simple steps and meet urgent expenses with ease.
What is a LIC policy loan?
A LIC policy loan allows you to borrow money directly from the Life Insurance Corporation of India by pledging your traditional life insurance policy. The loan amount depends on the surrender value of your policy, usually up to 80% of it. Interest is charged until repayment, and if the policy matures or is surrendered, the outstanding loan is adjusted against the proceeds.
What is a loan against insurance policy (other insurers or NBFCs)?
Unlike borrowing only from LIC, many private insurers and NBFCs also allow you to pledge eligible life insurance policies, such as endowment or ULIP plans, to access funds.
Key points:
- Broader scope: You can pledge policies from various insurers, not just LIC.
- Loan-to-Value (LTV): Usually 90% of the surrender value.
- Faster disbursal: NBFCs often process applications quickly than traditional insurers.
- Flexible repayment: Many lenders allow you to repay in EMIs or bullet payments.
Access liquidity without breaking long-term investments. Apply for a loan on insurance policy and secure funds while keeping your cover intact.
LIC vs loan against insurance
Here is a side-by-side comparison to understand LIC policy loan vs loan against insurance policy:
| Aspect | LIC policy loan | Loan against insurance policy (other insurers/NBFCs) |
|---|---|---|
| Eligibility | Only LIC-issued traditional policies | Endowment, ULIP, or eligible policies across insurers |
| Loan amount | Up to 80–90% of surrender value | Up to 90% of surrender value |
| Processing speed | Moderate; requires LIC approval | Faster disbursal, often digital |
| Interest rates | Fixed as per LIC’s declared rate | Competitive, varies by lender |
| Flexibility | Repayment linked to policy tenure | More repayment options, EMI or lump sum |
| Accessibility | Limited to LIC customers | Available to policyholders across multiple insurers |
Loan amount and interest rates: What to expect per provider
Comparing the financial terms is essential in deciding between LIC policy loan vs loan against insurance.
| Provider type | Loan-to-Value (LTV) | Interest rates |
|---|---|---|
| LIC (Traditional Policies) | Up to 80–90% of surrender value | Fixed rate declared by LIC (approx. 9–10%) |
| Other Insurers | Up to 70-85% of surrender value | 8–12% depending on insurer |
| NBFCs | Up to 90% of surrender value | 8–24% based on profile and tenure |
Compare loan rates before deciding. Check loan against insurance policy interest rate for smarter financial planning.
Benefits: retaining policy, lower rates, easy access
Borrowing against an insurance policy comes with clear advantages:
- Retain life cover: Your policy remains active, ensuring protection for your family.
- Lower interest rates: Loans are cheaper than unsecured options like personal loans or credit cards.
- Quick processing: Minimal paperwork and faster disbursal, especially with NBFCs.
- No income proof needed: The loan is secured against your policy, reducing eligibility hurdles.
