Loans Against Life Insurance Policy: Here're The Details

Insurance Regulatory and Development Authority of India (Irdai)

Irdai enables one to procure loans against their life insurance policies.

Loan Against Policy

Loans against life insurance policies help policyholders get funds by pledging their policy as collateral.

For Whom Is It Available

This facility is available for traditional policies, such as money-back and endowment policies, usually the ones that have both savings and life cover components.

Eligibility

For one to be eligible for a loan against a life insurance policy, the policy needs to have a surrender value.

Amount

The loan amount that is sanctioned is usually between 85 per cent and 90 per cent of the policy’s surrender value.

Rate of Interest

Interest rates are usually lower, which means that a borrower can save funds or interest amounts over the tenure of the loan.

Repayment Tenure

The repayment tenures for such loans are flexible. It offers the policyholder with the choice to make interest-only payments if required.

How to Get a Loan Against Insurance?

The loan in this case is approved relatively fast, usually within seven days of submitting an application. Even if the CIBIL score is less, it doesn't affect the eligibility. 

Borrower Fails to Repay?

If the borrower fails to repay, they are subject to face increased interest over time, which will reduce the maturity amount of the policy.

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