Question 1

What is a loan against a Life Insurance Policy?

Accepted Answer

This is a loan in which you use your life insurance policy as collateral. You pledge your policy to the lender for the term of the loan. The lender offers you a loan, up to the value locked in your policy, similar to a gold loan.

Question 2

Are all life insurance policies eligible?

Accepted Answer

Except Term policies, most life insurance policies are eligible. Please contact us to check eligibility.

Question 3

What is the interest rate on this loan?

Accepted Answer

The interest rate starts at 11% per annum. A loan against an Insurance Policy is a fully secured loan, so the risk for the lender is minimal, allowing them to charge lower interest rates.

Question 4

What is the loan amount that I can avail?

Accepted Answer

The minimum loan amount is ₹25,000 and maximum loan amount is ₹1 Crore. What you are eligible for will depend on your policy details.

Question 5

What is a surrender value? How can I check it for my policy?

Accepted Answer

Surrender value is the amount that the insurance company pays the policyholder if he/she decides to terminate the plan before maturity. To estimate your surrender value, please check our Surrender Value Calculator.

Question 6

Do I need to have a good credit score to avail this loan?

Accepted Answer

No, a credit score is not required. There is also no minimum salary requirement to avail this loan.

Question 7

What is the term of the loan?

Accepted Answer

The term of the loan or overdraft can vary from 12-36 months, depending on your needs and your policy eligibility.

Question 8

Can I get a credit line rather than a loan?

Accepted Answer

Yes! You can choose between a term loan and an overdraft product, once approved for credit against your insurance policy.

Question 9

How do I repay the loan taken against the insurance policy?

Accepted Answer

Term loan: You will repay the loan through Equated Monthly Instalments (EMIs). Overdraft: Based on your usage of the credit limit, you will make variable monthly payments.

Question 10

If I purchase insurance today, can I immediately take out a loan?

Accepted Answer

For most policies, the answer is No. The policy needs time to accumulate a surrender value, which could take a few months to a few years, depending on the policy. However, if it is a Single Premium policy, it could be eligible for a loan soon after purchasing the policy. Loan eligibility primarily depends on the surrender value your life insurance policy has accumulated. This value, which increases with the premiums you've paid and any bonuses your policy has earned, determines your loan eligibility. For more information, check out our Loan Eligibility Calculator.

Question 11

What happens if I cannot repay the loan by the end of the term?

Accepted Answer

If you fail to repay the loan, the lender to whom you have pledged the policy will recover the loan amount from your policy by surrendering the policy to your insurer. They will then close the loan and settle any remaining amount left after recovery back to you.

Question 12

I have a life insurance policy but it is not from LIC. Can I still avail a loan?

Accepted Answer

Yes, we are not just limited by policies from LIC. We will review policies from all insurers and get back to you. Contact us for more details.

Question 13

Are all insurance schemes eligible for loans?

Accepted Answer

Not all life insurance policies are eligible for loans. Policies that have a savings component, such as endowment, annuity, pension, and ULIPs, can qualify for loans. Policies like term, health, and accident insurance are not eligible for loans. For more information, check out our Loan Eligibility Calculator

Question 14

What does pledging the policy or marking a lien on it mean?

Accepted Answer

Loans against life insurance policies require you to “pledge” the policy to the lender. This means the lender has the right to surrender your policy in case of default. Essentially, the pledge enables the lender to utilize your policy as collateral. Once the loan is repaid, the policy is reassigned back to you, allowing you to enjoy all of its benefits.

Question 15

Will I have to continue paying policy premiums during the loan tenure?

Accepted Answer

Yes, it is advisable to keep paying your premiums during the tenure of the loan to avoid penalties, charges and the risk of your policy lapsing resulting in you losing out on policy benefits.

Question 16

Who is eligible as an IFA?

Accepted Answer

Anyone who is offering investment advisory, mutual fund distribution, insurance sales or distributing other loans, credit cards and accounts could be a good fit. Not already an IFA? You can still partner with us. Contact us to know how.

Question 17

What is the commission structure for IFAs?

Accepted Answer

The commission paid to Independent Financial Advisors (IFAs) varies based on the amount disbursed. Currently, it is 0.5% of the loan amount disbursed. Please note that the commission structure may change over time. For example, if customers referred by you take loans of ₹ 10,00,000 against their policies this month, you will earn ₹ 5,000. If you facilitate loans worth ₹ 1 Crore, you will earn ₹ 50,000.

Question 18

If my customers purchase insurance today, can they immediately take out a loan?

Accepted Answer

For most policies, the answer is No. The policy needs time to accumulate a surrender value, which could take a few months to a few years, depending on the policy. However, if it is a Single Premium policy, it could be eligible for a loan soon after purchasing the policy. Loan eligibility primarily depends on the surrender value your life insurance policy has accumulated. This value, which increases with the premiums you've paid and any bonuses your policy has earned, determines your loan eligibility. For more information, check out our Loan Eligibility Calculator

Question 19

Are all insurance schemes that customers hold eligible for loans?

Accepted Answer

Not all life insurance policies are eligible for loans. Policies that have a savings component, such as endowment, annuity, pension, and ULIPs, can qualify for loans. Policies like term, health, and accident insurance are not eligible for loans. For more information, check out our Loan Eligibility Calculator

Question 20

What does pledging the policy or marking a lien on it mean?

Accepted Answer

Loans against life insurance policies require you to “pledge” the policy to the lender. This means the lender has the right to surrender your policy in case of default. Essentially, the pledge enables the lender to utilize your policy as collateral. Once the loan is repaid, the policy is reassigned back to you, allowing you to enjoy all of its benefits.

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50% of policyholders lose their policy benefits and savings owing to surrender or lapse

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RESOURCES

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Frequently Asked Questions

What is a loan against a Life Insurance Policy?

Are all life insurance policies eligible?

What is the interest rate on this loan?

What is the loan amount that I can avail?

What is a surrender value? How can I check it for my policy?