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 Loan against Lic policy

Loan against Lic policy

Taking a Loan against your Life insurance will be possible in most cases and that will be your choice to take it. And may be subject to verification and approval. Meanwhile, the following factors need to be considered before taking a loan against a Life insurance policy.

1. Policy Eligibility

Not all types of life insurance policies are eligible for loans. Generally, policies that build cash value, such as whole life, and endowment, are eligible for loans. Term life insurance policies usually do not have a cash value and, therefore, cannot be used for this purpose.

2. Cash Value Accumulation

Over time, certain types of life insurance policies accumulate a cash value. This value is a portion of the premium payments that are invested by the insurance company. The cash value grows over time and can be used for various purposes, including taking loans.

3. Loan Amount

The maximum loan amount you can obtain is usually a percentage of the policy’s cash value. The actual percentage can vary depending on the insurance company and policy terms. But in general, this amount can be max 85-90% of your policy amount.

4. Loan Interest

When you take a loan against your life insurance policy, the insurance company charges an interest rate on the loan amount. This interest is typically lower than what you might find with other types of loans, but it still needs to be repaid. And also it depends upon loan-providing financial institutions.

5. Loan Repayment

You can usually choose to repay the loan in various ways, such as making regular interest payments, repaying both interest and principal or allowing the interest to accumulate and deducting it from the death benefit upon policy maturity or the insured’s death.

6. Impact on Policy

Keep in mind that taking a loan against your policy will reduce the cash value and death benefit of the policy. If the loan and interest are not repaid, they will be deducted from the death benefit.

7. Loan Application Process

To obtain a loan against your LIC policy, you typically need to apply through the insurance company. The process may involve providing information about the policy, completing a loan application form, and agreeing to the terms and conditions. Then the loan provider will cross-verify the submitted information.

8. Loan Use

The funds obtained from the loan can be used for any purpose you choose. It might be used for emergencies, debt consolidation, education expenses, or other financial needs. 11


Before taking a loan against your LIC policy or any life insurance policy, it’s essential to thoroughly understand all the terms, interest rates, and potential impacts on your policy’s cash value and death benefit. If you’re considering this option. and generally it’s better to take loan against long term plan’s and Jeevan Shanti is one of the best suitable policy from LIC.

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