There are certain points to consider before you opt for a loan against an insurance policy. These points will help you understand the terms and conditions of the loan application.
Not every insurance policy is qualified to serve as collateral for a loan against policy. Therefore, you have to cross-check if his/her policy is eligible by going through the eligibility criteria.
The surrender value
The current value of your policy decides the loan amount or the amount of limitation. For example, if you have an insurance policy of Rs,10 Lakh; you will be unable to receive Rs.10 Lakh during loan processing. The loan amount is not based on the policy’s maturity value.
Average waiting period
Normally, there is a waiting period of about three years before you can apply for a loan against policy.
Dealing with defaults
Your policy will lapse in case of any default with the payment system. In such a case, the due amount will be adjusted from the surrender value. This will also be unable to safeguard you and your family and undermine the purpose of investing in an insurance policy.
Repayment system
You have an entire insurance policy term to repay the loan. You can either pay back the principal amount earlier or continue paying the interest every month. The rest of the loan amount will be settled against its claim once the insurance policy reaches its maturity.
Make sure that you keep these points in mind before you go for a loan against policy.
To know more about the loan against policy, click here: 5 Things To Remember While Taking A Loan Against An Insurance Policy
These points are as follows:
Eligible policiesNot every insurance policy is qualified to serve as collateral for a loan against policy. Therefore, you have to cross-check if his/her policy is eligible by going through the eligibility criteria.
The surrender value
The current value of your policy decides the loan amount or the amount of limitation. For example, if you have an insurance policy of Rs,10 Lakh; you will be unable to receive Rs.10 Lakh during loan processing. The loan amount is not based on the policy’s maturity value.
Average waiting period
Normally, there is a waiting period of about three years before you can apply for a loan against policy.
Dealing with defaults
Your policy will lapse in case of any default with the payment system. In such a case, the due amount will be adjusted from the surrender value. This will also be unable to safeguard you and your family and undermine the purpose of investing in an insurance policy.
Repayment system
You have an entire insurance policy term to repay the loan. You can either pay back the principal amount earlier or continue paying the interest every month. The rest of the loan amount will be settled against its claim once the insurance policy reaches its maturity.
Make sure that you keep these points in mind before you go for a loan against policy.
To know more about the loan against policy, click here: 5 Things To Remember While Taking A Loan Against An Insurance Policy
Alisha Antil is your best financial helper for insurance. She has a vast experience in finance and insurance and provide to you the expert advise in insuring your property and health.
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