Everything You Need to Know About Loan Against Insurance Policy

Your insurance policy offers peace of mind to you and your loved ones in case of an accident, serious health issues or death, depending on the kind of insurance you have. However, did you know that you can avail loan against an insurance policy to meet your short-term financial needs?

Here are some details that you should know before you decide to take a loan against your insurance cover. 

You can Get Loan Only Against Specific Insurance Policies

Not all insurance policies can be used as a loan against the insurance policy. Some lenders will provide loans against endowment, whole life, and money back policies while others will accept ULIPs and term policies. Usually, lenders lend up to INR10 crore against high-value insurance policies that can be repaid in 12 months.

Waiting Period After Buying the Policy

It is not possible to buy an insurance policy and immediately use it as collateral for a loan. If you do it, your application will be rejected. You need to wait a minimum of three years after buying your insurance policy to apply for a loan. So, make sure you first talk to your insurance provider and lender before applying for a loan against the insurance policy.

How Much Loan Can You Avail?

If you think that you will get a loan amount that is equal to the value of your insurance policy, you are mistaken. Most lenders will offer up to 50% of the policy’s surrender value. For instance, if the surrender value of a policy is INR 1 crore, you will be able to get a loan amount of INR50 lakh. This said, the older the policy, the higher the loan amount the lender will offer.

These are some of the essential aspects of loan against an insurance policy that you should know.

To know more about the loan against insurance policy, click here: All You Need to Know About a Loan Against an Insurance Policy