₹25,000.00 - ₹25 Cr
Loan of up to 80% of policy value| Funding against policies under lock-in period
Overview
Can You Get a Loan Against a Life Insurance Policy
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In summary
- A loan against a life insurance policy is a secured loan where the eligible policy is pledged as collateral.
- It can provide access to funds without requiring you to surrender the policy or liquidate other investments.
- Only eligible life insurance policies with an applicable surrender value may qualify for this type of borrowing.
- Interest rates, loan amounts, repayment terms, and eligibility criteria can vary depending on the lender and policy.
- The policy generally continues to provide insurance benefits, subject to the policy terms and timely repayment of the loan.
- Before borrowing, consider the interest costs, applicable charges, loan-to-value limits, and potential impact on policy benefits.
A loan against a life insurance policy allows you to borrow money by pledging your life insurance policy as collateral. Since the policy serves as security for the lender, the loan is classified as a secured loan. As a result, lenders often offer lower interest rates, quicker approvals, and simpler eligibility requirements compared to unsecured borrowing options.
This type of loan can be useful when you need immediate funds without selling investments or liquidating assets. However, only eligible life insurance policies with a surrender value can be used for this purpose. For qualifying policyholders, it provides a convenient way to access liquidity while continuing to retain the benefits of the insurance cover.
Looking for quick funds without selling your investments? Apply for a loan against insurance policy today.
What is a personal loan against insurance policy?
A personal loan against insurance policy refers to borrowing money by pledging your life insurance plan as collateral. In reality, this is not an unsecured personal loan. Instead, it is a secured facility where the insurer or lender holds the rights of the policy until the loan is repaid. This means you do not need to liquidate your insurance investment or compromise on financial protection. The loan is approved based on the surrender value of your policy and offers more affordable interest rates compared to unsecured loans.
What are the different types of insurance policies available in India?
How to Secure a Rs. 2 Crore Loan Against Securities Instantly
Not all policies are eligible. Only certain types of life insurance plans qualify for loans. Pure term insurance plans are not accepted as collateral since they do not carry a surrender value.
Types of policies that qualify:
- ULIP (Unit Linked Insurance Plan) – Combines investment and insurance with a surrender value.
- Endowment policies – Traditional plans with a savings component.
| Policy type | Eligible for loan | Reason |
|---|---|---|
| Term insurance | No | No surrender value |
| ULIP | Yes | Has a surrender value |
| Endowment policy | Yes | Accumulates cash value |
| Money-back policy | Yes | Provides savings and returns |
Need urgent liquidity from your ULIP or endowment plan? Get a loan against insurance policy with simple eligibility.
Eligibility for a loan against a life insurance policy
The loan amount is usually determined by the surrender value of your policy. Lenders typically offer up to 80% of this value as the loan limit.
Eligibility criteria generally include:
| Criteria | Requirement |
|---|---|
| Age | 21 to 90 years |
| Policy type | ULIP |
| Employment | Salaried or self-employed |
| Nationality | Indian |
| Ownership | Borrower should be the policyholder |
| Surrender value | Minimum surrender value of policy is Rs. 25000 |
For example, if your policy has a surrender value of Rs. 10 lakh, you may be eligible for a loan of up to Rs. 7–9 lakh.
Looking for a high-value loan at a lower interest rate? Check your eligibility here
How does the loan against insurance policy work?
Here is a simple step-by-step explanation:
- Policy review – The lender checks if your insurance policy qualifies.
- Loan application – Submit a request with required documents.
- Policy assignment – The rights of the policy are temporarily assigned to the lender.
- Agreement – Accept the agreement and review the loan terms, and provide your consent for sanction and disbursement.
- Loan sanction – Based on the surrender value, the approved loan is disbursed.
- Repayment – Repay via EMIs or lump sum, depending on terms.
- Reassignment – After repayment, the policy rights are transferred back to you.
This structure ensures you get funds without losing long-term insurance protection.
Charges, interest rates and repayment models
Interest rates are generally lower than unsecured loans since the loan is secured. However, the exact rate depends on the insurer and loan amount.
Common charges and repayment models:
| Component | Details |
|---|---|
| Interest rate | 8% p.a. – 24% p.a.approx., varies by lender |
| Processing fee | Nominal |
| Repayment | EMI or flexible repayment |
| Prepayment | Usually allowed with small charges |
Learn more about repayment details in our LIC policy loan interest rate
Documents required and assignment process
How to apply for Bajaj Finance loan against shares
When applying, you need to submit a few standard documents along with your insurance details.
| Document | Purpose |
|---|---|
| KYC (PAN/Aadhaar/Passport/driving license/voter ID/NREGA job Card/letter issued by National Population Register | KYC verification |
| Policy document | To confirm policy type and surrender value |
| Assignment form | To assign policy rights to lender |
| Application form | Loan request submission |
Assignment process:
- The policyholder signs an assignment form, transferring policy rights to the lender.
- The lender informs the insurer about the assignment.
- Once the loan is repaid, rights are reassigned back to the policyholder.
Benefits of loan against insurance policy
Here are some major advantages:
- Quick approval due to minimal documentation.
- Lower interest compared to personal loans.
- No need to liquidate long-term investments.
- Continue enjoying insurance cover.
- Flexible repayment options.
- High-value loans are possible for policies with a large surrender value.
Convert your insurance into instant liquidity. Apply for a loan against insurance policy now.
Documents required to avail loan on SBI life policy
To apply for a loan against your SBI life insurance policy, you need to submit a few essential documents for verification. These ensure your eligibility and help in quick loan processing.
- Duly filled loan application form
- Original SBI life insurance policy bond
- Identity proof (PAN, Aadhaar, Passport, etc.)
- Address proof (Utility bill, Aadhaar, Driving licence)
- Recent passport-sized photographs
Conclusion
A loan against your eligible life insurance policy like a ULIP or endowment plan gives you access to funds without breaking your long-term plan. With low interest, flexible terms, and uninterrupted insurance benefits, it’s a thoughtful alternative to traditional borrowing.
Ready to explore this smart borrowing option? Apply for a Loan Against Insurance Policy now.
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Frequently asked questions
Eligibility
Application
Benefits
Which types of insurance policies are eligible (LIC, ULIP, endowment)?
How much loan amount can I get on my insurance policy?
The loan amount is usually up to 80% of your policy’s surrender value. For instance, if your insurance policy has a surrender value of Rs. 10 lakh, you may be eligible for a loan between Rs. 7–9 lakh, depending on the lender’s evaluation and eligibility conditions.
What interest rates and fees are involved?
Interest rates for loans against insurance policies are generally lower than unsecured loans, ranging between 8% and 24% annually. Lenders may also charge a nominal processing fee and, in some cases, prepayment or foreclosure charges. Rates and fees vary depending on the lender and policy type.
What happens if I cannot repay the impact on the policy?
If you default on repayment, the outstanding loan amount, including interest, is deducted from your policy’s surrender value. In case of policy maturity or claim, the insurer will adjust dues before releasing benefits. Persistent non-payment can even result in the policy lapsing or being terminated.
How fast is the disbursal timeline?
The disbursal timeline is relatively quick since the loan is secured against your insurance policy. Minimal documentation and faster processing make it one of the quickest secured borrowing options.
Can I take a loan against a term insurance policy?
No, you generally cannot take a loan against a term insurance policy. Term insurance does not accumulate a cash or surrender value, which is required as collateral for a loan. Loans are typically available only against certain life insurance policies, such as endowment, money-back, or whole life plans.
Can I continue to receive insurance coverage after taking a loan against my policy?
Yes, in most cases, your insurance coverage continues even after you take a loan against the policy, provided premiums are paid on time. However, any outstanding loan amount, along with accrued interest, is usually deducted from the claim amount or maturity benefit payable under the policy.
Disclaimer
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