What is a Loan Against Insurance Policy and How Does it Work?

Know more about loan against insurance policy as a borrowing option and its benefits.
Get easy loans against your insurance policy!
3 mins
23-April-2025

Ever felt stuck between needing urgent funds and not wanting to break a long-term plan? If yes, you're not alone. Financial emergencies don’t wait for the right time and neither should your solution. Fortunately, there’s a lesser known but highly effective way to raise funds without letting go of your investments or insurance coverage: a Loan Against Insurance Policy. Whether it is for a medical emergency, a business opportunity, or short-term cash flow issues, this loan lets you leverage your insurance policy without losing its benefits.

Wondering if your insurance policy qualifies for a loan? Check your eligibility in seconds.

What is a loan against insurance policy?

A loan against insurance policy is a secured loan that allows you to borrow money using your life insurance policy as collateral. Unlike personal loans, this solution helps you maintain your insurance coverage while giving you liquidity when you need it most.

You do not need to break your long-term plans to solve a short-term problem.

Avail loan of up to Rs. 25 crores* without breaking your plan. Do not surrender your policy, leverage it smartly. Apply now!

Key highlights at a glance

  • Loan amount: Rs. 25,000 up to Rs. 25 crores*
  • Eligible against endowment and ULIP policies
  • Loan up to 95% of the surrender value
  • Interest charged only on utilised amount (for Flexi variants)
  • Keep your insurance and investment benefits intact
  • Tenure up to 96 months
  • Minimal documentation
  • Quick disbursal – usually within 48 hours*

How does a loan against insurance policy work?

Here’s how the process unfolds:

  1. Eligibility check: The policy should be an endowment or ULIP. Term plans are not eligible as they don’t carry surrender value.
  2. Loan amount calculation: Lenders evaluate the surrender value of your policy and typically offer a loan up to 95% of this value.
  3. Collateral pledge: Your policy is assigned to the lender. You retain the policy, but they hold it as collateral.
  4. Loan disbursal: Once approved, funds are usually transferred within 24–48 hours*.
  5. Repayment: You can repay via EMIs or, for flexi loans, withdraw and repay as needed, paying interest only on the used amount.

You stay insured while accessing liquidity, perfect for time-sensitive needs without financial compromise.

Quick liquidity without touching your savings? Get funds without surrendering your policy | Apply now

Why consider a loan against insurance policy?

You might be thinking, “Why not just take a personal loan or dip into my savings?”

Here’s what sets this option apart:

1. You stay insured

Unlike surrendering your policy, this lets you access funds without giving up coverage or future maturity benefits.

2. Lower interest rates

Since this is a secured loan, interest rates tend to be more affordable than unsecured loans.

3. Quick and easy process

You don't need to go through extensive financial scrutiny. If you have a valid policy with a decent surrender value, approval is typically quick.

Who is it ideal for?

This type of loan works best for individuals who:

  • Need urgent funds for medical, business, or education expenses
  • Don’t want to break an FD or liquidate high-performing investments
  • Are in the lock-in period of their policy but still need liquidity
  • Want short-term borrowing without long-term financial disruption

In other words, it’s suited for calculated borrowers who want liquidity without compromising on protection.

What types of policies are eligible?

You can apply for a loan against:

  • Endowment policies: Traditional savings-based plans.
  • ULIPs: Investment + insurance hybrid policies.

Note: Term life insurance plans are usually not eligible, as they don’t carry a surrender value.

Not sure if your policy qualifies? Check if your ULIP or endowment is eligible | Take a quick scan

How much can you borrow?

The loan amount depends on your policy’s surrender value, that’s the amount you would receive if you voluntarily exited the policy today.

Here’s what most lenders offer:

Parameter

Range

Loan Amount

Rs. 25,000 – Rs. 25 crores*

Loan-to-Value (LTV)

Up to 95% of surrender value

Tenure

Up to 96 months

Disbursal Time

Typically, within 48 hours*


The more mature your policy, the higher your surrender value, and the more you can borrow.

What are your repayment options?

Most lenders offer two models:

Term loan

A standard repayment plan with EMIs over your chosen tenure. Best for one-time large expenses.

Flexi loan

A pre-sanctioned limit from which you can withdraw funds as needed. You pay interest only on the amount used. Great for variable or phased expenses.

Bonus tip: With some lenders, you can defer interest payments until after your policy's lock-in period ends.

Choose how you repay.

Withdraw multiple times. Pay interest only when used

Does it affect my insurance coverage?

This is the best part, your insurance continues as usual. That means:

  • Your nominee stays protected
  • Your investment keeps growing (in case of ULIPs)
  • You retain maturity and tax benefits

However, if the loan is not repaid and the policy matures or is surrendered, the outstanding amount is adjusted from the final payout.

Stay protected. Stay funded. Keep your coverage while accessing funds. Apply now

How to apply?

The application process is relatively simple.

Step 1: Click on ‘Apply’

Ready to begin? Just tap on the ‘Apply’ button on our page to start your journey.

Step 2: Fill in your basic details

We will ask for a few personal details like your name, PAN, date of birth, etc. It won’t take more than a minute!

Step 3: Verify your email

Enter your email ID, and we will send you a quick verification link. Just click to confirm and done!

Step 4: Add your policy details

Here’s where you enter your insurance policy number and other key info. This helps us build your custom loan offer based on your policy.

Step 5: Get your personalised offer

We will instantly evaluate your policy’s loan value and share a tailored loan offer, no guesswork, just a clear number you can count on.

Step 6: Complete your KYC

To move forward, complete a quick KYC verification. It’s digital, secure, and takes just a few steps. Once done, your sanction letter will be ready!

Step 7: Set up auto-repayment (E-mandate)

Next, register an E-mandate, this lets you repay your EMIs automatically, so you never miss a due date.

Step 8: Review and accept the loan terms

Go through the final agreement, give your consent, and you are almost there. We will prepare your loan for disbursal.

Step 9: Submit your insurance policy

Now, submit your policy document. We’ll do a final check to confirm the loan amount.

Step 10: Receive your funds

That’s it! Once we verify your policy, the loan amount is disbursed directly to your bank account. Fast, simple, and stress-free.

Documents required

  • KYC documents (ID + address proof)
  • Insurance policy document
  • Bank account proof

Once submitted, approvals are often given within 24–48 hours*, and funds disbursed soon after.

How it compares with other options?

Feature

Loan against insurance

Personal loan

Collateral Needed

Yes (insurance policy)

No

Interest Rate

Lower

Higher

Loan Disbursal Time

48 hours*

2–7 days

Coverage Impact

None

Not applicable

Prepayment Charges

Usually, Nil

May Apply

Maximum Loan Amount

Up to Rs. 25 crores*

Up to Rs. 40 lakhs


If you have an insurance policy in force, this option could offer better flexibility, lower costs, and zero impact on your long-term plans.

Confused between loan types? Compare personal loan vs insurance loan. Make the smart move

Still unsure? Think about it this way

If you are facing a cash crunch, would you sell your home, a valuable long-term asset, just to tide over a temporary need? Probably not. You would consider taking a loan against it instead.

The same logic applies to your insurance policy. Rather than surrendering it and losing long-term benefits, why not unlock its value with a loan? It’s smarter, faster, and keeps your future plans intact.

Things to consider before applying

A loan against insurance policy is a smart tool—but like all financial products, it needs to be understood well.

  1. Repayment impact: If you don’t repay, the lender adjusts the loan amount from the policy’s surrender/maturity value.
  2. Market risk (for ULIPs): Since ULIP values depend on market performance, the surrender value may fluctuate.
  3. Policy type: Only policies with surrender value, like endowment or ULIPs are eligible.
  4. Assignation: The policy is temporarily assigned to the lender and reverts to your name once the loan is repaid.
  5. Insurance impact: If the insured passes away during the loan period, the loan is deducted from the death benefit before the nominee receives the remaining amount.

Final thoughts

A loan against insurance policy is more than just an emergency measure. It’s a financial tool for those who plan smartly balancing liquidity and protection. Whether you’re facing a short-term need or eyeing a strategic opportunity, this type of loan allows you to act without dismantling your future plans.

Use your policy not just as protection, but as a lever for confident decision-making.

Be financially flexible without financial loss. 

Get funds. Keep cover. Stay invested. Apply now

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

Frequently asked questions

Which types of insurance policies can be used for a loan?

You can avail a loan against active Endowment or ULIP policies from select insurers like Bajaj Allianz, ICICI Prudential, TATA AIA, Reliance Nippon, or Aviva Life Insurance. Term plans are not eligible for such loans.

What are the interest rates on loans against insurance policies?

Interest rates on loans against insurance policies usually up to 24% per annum, depending on the insurer and policy type.

Is it better to take a personal loan or a loan against an insurance policy?

A loan against an insurance policy is often better due to lower interest rates and minimal documentation. However, it depends on the lender as well as the loan amount needed and how much surrender value your policy has.

Can I prepay my loan against an insurance policy?

Yes, you can prepay your loan against an insurance policy anytime. However, charges apply—up to 4.72% (inclusive of taxes) on the outstanding amount for full prepayment, and up to 4.72% of the principal prepaid for part-prepayment.

Show More Show Less

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.