🔑 Key Features
| Feature | Description |
|---|---|
| Loan Type | Secured loan using insurance policy as collateral |
| Loan Amount | Up to 85%–90% of the policy’s surrender value |
| Eligibility | Only traditional policies with cash value (e.g. endowment, whole life) |
| Interest Rate | Typically 9% – 12% per annum |
| Repayment | Interest-only or EMI-based, depending on lender |
| Policy Ownership | You retain the policy; a lien is marked on it until repayment |
| Loan Tenure | Till policy maturity or earlier |
📌 What is “Surrender Value”?
The surrender value is the amount you get if you voluntarily terminate the policy before maturity. It’s the base value used to determine how much loan you can get.
💡 Example
You own a LIC Endowment Plan with a surrender value of ₹2,00,000
You get a loan of ₹1,80,000 (90% of value)
You pay 10% interest annually
Your policy continues to stay active
🧮 Sample Calculation
| Policy Surrender Value | ₹3,00,000 |
|---|---|
| Max Loan (90%) | ₹2,70,000 |
| Interest Rate | 10% p.a. |
| Monthly Interest | ₹2,250 |
| Tenure | 3 years (or till maturity) |
Apply Loan
📋 Documents Required
Original insurance policy
Identity proof (Aadhaar, PAN)
Assignment form (to mark lien in lender’s favor)
Loan application form
✅ Benefits of Loan Against Insurance Policy
🔒 Keep your policy active while using it for liquidity
💰 Lower interest than personal loans or credit cards
🕒 Quick processing (especially with LIC or your own insurer)
📉 No need for high income or credit score
🧾 Flexible repayment options – bullet or EMIs
⚠️ Considerations
| Concern | Why It Matters |
|---|---|
| Only traditional plans allowed | No loan against term insurance or ULIPs |
| Loan limited to surrender value | Not the full sum assured |
| Unpaid loan affects death benefit | If you die before repayment, the insurer deducts outstanding dues |
| Loan default risks | Can lead to policy lapse or surrender by insurer |
📌 Best Use Cases
Emergency medical expenses
Avoid breaking FD or investments
Short-term business or personal liquidity
Tax-saving asset stays active (policy continues)
🔁 Loan vs Surrendering Policy
| Option | Impact |
|---|---|
| Loan | Keep your insurance benefits, only pay interest |
| Surrender | Lose your life cover + get less than actual value |