Life Insurance Policy Loan FAQs

Not all life insurance policies qualify for loans. Policies with a savings or investment component, such as endowment policies, whole life policies, guaranteed income, money-back and Unit Linked Insurance Plans (ULIPs), typically accumulate a cash value and are eligible.

Term insurance policies, accident and health plans that lack a cash value component, are ineligible.

A notification or acknowledgement of your assignment request is not sufficient. The lender needs a legitimate, verifiable confirmation, which comes through one or more of:

• A direct communication from the insurer to the lender confirming the assignment
• An email confirmation to you with the insurer's endorsement letter attached
• The physical policy bond, or a physical assignment confirmation from the insurer received by the lender

Once the lender has received the assignment confirmation, the following steps take place:

1. Verification: If the lender has received direct communication from the insurer then no verification is undertaken. However, if the customer forwards the confirmation received from the insurer to the lender, the lender may carry out a physical/manual fact-check with the insurer before proceeding. This step exists to protect you — it confirms the assignment is genuine and correctly recorded before any money moves.
2. Approval: Disbursement isn't a single click. Depending on loan size and your profile, it goes through an internal approval matrix — standard lending practice.
3. Disbursement: Once approved, the lender initiates transfer via NEFT, and a UTR (Unique Transaction Reference) is generated.
4. Fund Transfer: Funds move to your account shortly after disbursement by the lender.

The end-to-end process follows these steps:

Policy Assignment → Insurer Confirmation → Verification → Approval → NEFT/UTR → Funds Received

If disbursement doesn't happen within the prescribed window — provided all required conditions are met (documents submitted, assignment executed in the lender's favour, etc.) — below are the common reasons for delay:

• System downtime: The lender's Loan Management System (LMS) can occasionally go down temporarily, delaying disbursement initiation. This is operational, not a red flag on your application.
• Outdated Fund Value (FV): If your FV was fetched many days before disbursement, it's no longer usable — markets move, and an outdated FV distorts your Loan-to-Value (LTV) ratio. In this case, an updated FV is pulled, and you may need to sign a fresh loan agreement reflecting the current figures. This isn't a new loan or application — it's a recalibration to keep terms accurate and fair to you.
• Outdated Loan Agreement: If your loan agreement was signed 30 days before the actual disbursement, it becomes invalid. You may need to sign a fresh loan agreement reflecting the current figures. This isn't a new loan or application, but a re-signing of the loan agreement within the acceptable timeline.
• Technical issues requiring resolution: Any communication about this will come from Mera Kal or the lender directly, through official channels only, including hello@merakal.in / support@abhiloans.com / 9901672084. If you get a request through any other channel, treat it as suspicious and verify with us directly.

If the policy has been assigned to the lender, and all confirmations have been received, the lender is bound by RBI rules to disburse the funds to you. If for any reason the disbursement is not completed by the lender within 7 days of confirmation, the insurer will reverse the assignment. There is no way in which an RBI-regulated lender can misuse your assigned policy.

Note that the interest on your loan accrues only from the date of fund transfer. You're never left in limbo; if all the conditions are met, disbursement is bound to happen.

If you have signed a loan agreement, check the terms of cancellation, as these vary across lenders. In some cases, there are non-refundable charges such as processing fees which would need to be paid if you choose to cancel. Remember you can also foreclose the loan soon after disbursement, if you wish, typically with no penalties.

To cancel the policy assignment, the only reason insurers accept is when — despite all conditions being met — the loan has not been disbursed into the customer's account within an acceptable timeframe.

In other cases, the assignment cannot be cancelled without the lender issuing an NOC post loan foreclosure.

The exact process, documents and charges, if any, will depend on the lender and insurer.

If your policy has been assigned and the expected disbursement timeline has passed:

• Check whether the lender has received the assignment confirmation.
• Check whether any verification or documentation is pending.
• Confirm whether your Fund Value or loan agreement needs to be updated.
• Check for any communication from the lender regarding pending conditions.
• Contact Mera Kal or the lender through their official channels for an update.

Do not make any payment or share sensitive information with an unverified person claiming to be from Mera Kal, the lender, or the insurer.

Your policy serves as collateral, but credit checks and minimum-score requirements depend on the lender. A low or missing credit score does not by itself establish eligibility. The lender assesses the application and decides whether to approve the loan.

To apply for a loan against your life insurance policy, follow these steps:

1. Upload your policy document and we will get back to you if your policy is eligible for a loan.
2. Share policy details.
3. Complete digital KYC process and bank verification.
4. Choose between a term loan or overdraft.
5. Pledge your policy to the lender.
6. Sign loan offer and receive the loan amount.

The loan amount depends on the type of plan (endowment, pension, ULIP, etc.) and the policy’s surrender value or fund value. Most lenders offer a loan-to-value (LTV) ratio ranging from 50% to 90%.

Mera Kal advertises interest rates starting at 11% per annum. Your offered rate depends on the lender, policy type, loan amount and eligibility. Confirm the interest calculation method, applicable fees and repayment terms in the lender’s offer. See our policy loan rates and fees guide.

In an overdraft facility, interest is charged only on the amount utilized, not the entire approved limit. For instance, if you have an overdraft limit of ₹1,00,000 but utilize only ₹50,000, interest is calculated solely on the ₹50,000.

You can use the Mera Kal Overdraft Calculator to model any usage scenario.

For most policies, the answer is no. Depending on the policy, the policy needs time to accumulate a surrender value, which could take a few months to a few years.

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.

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 to recover any past dues in case of a 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.

The key differences between an overdraft and a term loan are:

The policyholder, loan applicant, and bank mandate (EMI repayment) registration must all be in the same person's name.

If the life assured is a different adult from the policyholder, the loan application and bank mandate must still be in the policyholder's name. A No Objection Certificate (NOC) from the life assured will also be required.

If the loan application or bank mandate is registered in another person's name, the loan may not proceed and could be rejected.

The loan applicant must complete KYC and register the bank mandate in their own name. The policyholder, loan applicant, and bank mandate holder must be the same person.

You can select a loan tenure that you are eligible for based on your insurance policy details and the lender's credit policy.

Yes, endowment policies, which combine savings with insurance coverage, typically accumulate a surrender value over time, making them eligible for loans.

Yes, LIC policyholders can avail loans against their policies, subject to the policy having a minimum surrender value.

No, term insurance policies do not have a savings or investment component and therefore do not accumulate a surrender value, making them ineligible for loans.

Most pension plans are eligible for loans during the accumulation phase, and some during the annuity phase too. Share your policy details to check on case-specific eligibility.

No, health and accident insurance policies do not accumulate a cash or surrender value and are not eligible for loans.

Yes, you can take a loan against your ULIP policy if the fund has accumulated sufficient value.

During the lock-in period:

• A loan on a ULIP policy is possible, but the amount may be lower due to the lock-in restrictions. Lenders typically offer loans up to 40%–60% of the current fund value, depending on the underlying funds and lock-in time remaining.

After the lock-in period:

• Once your ULIP crosses the 5-year mark, loan values improve. You can typically get a loan against your ULIP policy for 50-75% of the fund value, depending on the underlying funds.

Non-repayment can lead the lender to recover the outstanding amount by surrendering the policy to the insurer and using the proceeds to settle the debt. Any remaining funds after settling the loan may be returned to you. Additionally, surrendering the policy will result in the loss of life cover provided by the policy.

If the loan and any accrued interest are not repaid by the time the policy matures, the outstanding amount will be deducted from the maturity proceeds.

Yes, most lenders allow partial or full prepayment without penalties.

Loan disbursement typically takes 2–4 working days, depending on the insurer and the completeness of your documents.

You can choose between the following repayment options:

When the life insurance policyholder dies:

• The insurer pays out the death benefit.
• The payout goes to the nominee or legal heir mentioned in the policy.

If a policyholder with an outstanding loan dies:

• The nominee files a death claim.
• The insurer settles the lender for the outstanding loan amount and accrued interest.
• The remaining amount is paid to the nominee.

For example, if the death benefit is ₹10,00,000 and the outstanding loan plus interest is ₹3,00,000, the nominee will receive ₹7,00,000.

No, the loan is not forgiven. The lender has the right to recover the loan from the policy that was pledged to them.

The insurer pays off the loan directly from the death claim amount. The nominee does not need to repay the loan but will receive only the remaining balance after loan deduction.

Yes, the nominee receives the death benefit less the amount due to the lender. The insurance company coordinates the claim process between the lender and the nominee.

No. After the policyholder's death, the policy status moves to Death Approved once the lender has been settled for any outstanding principal and interest, and the remainder is paid to the nominee.

Anyone offering investment advisory, mutual fund distribution, insurance sales, or distributing other loans, credit cards, and accounts could be a good fit.

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The commission paid to Independent Financial Advisors (IFAs) varies based on the amount disbursed. Currently, it is 0.75% of the loan amount disbursed. Please note that the commission structure may change over time.