How To Avail Loan On Insurance Policy? Things To Keep In Mind

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Nowadays, loans against life insurance policy are becoming a popular choice for customers. Loan against life insurance policy is easily available with the lower rate of interest when compared with personal. When you take a loan against the insurance policy, the policy value does not change with the market.

Documents required

There are some documents needed to apply for the loan against the insurance policy. To avail a loan against your life insurance policy, the applicant needs to file an application in a pre-prescribed format. He or she has to submit the original life insurance policy and sign a deed of assignment. You may need to submit the payment receipts for future premiums and a cancelled cheque leaf to the bank.

Things to know

Before applying for a loan against insurance you need to keep in mind the following points

  • The loan has to be repaid by the applicant during the term of the policy.
  • If there is any default on the loan repayment, any claim will be considered only after deducting the outstanding amount.
  • In the event of non-payment of a subsequent premium of the policy after taking a loan, insurers may terminate the policy.

Loan eligibility

You can't avail the loan of all insurance policies. Plans like endowment policies, money back plans and Unit Linked Insurance Policies (ULIPs) are eligible for loans. As term plan does not have any cash value associated with it, term insurance plans are not eligible for any loans. Term plans expire at the end of the term with no returns.


The loan should be repaid during the term of the policy. The repayment options are different for banks and financial institutions. Some firms offer loans with a minimum tenure of six months. If the customer wishes to repay it before six months, he or she will have to pay interest for the full six months. 



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