Taking life insurance policies in today's times can be a wise decision as this can offset future financial shocks. Life insurance plans not only offer financial security to your loved ones but also provide important tax benefits. But are you aware of some other valuable applications of life insurance policies?
One of the biggest benefits of having a life insurance policy is that you can avail of loans against it in case of requirement. However, not all life insurance policies are eligible for loans.
According to the guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI), term insurance and unit-linked plans are not eligible for loans.
Which loan insurance policies are eligible for a loan?
All traditional insurance policies - like a money-back plan, endowment plan or whole life insurance policy - are eligible for a loan. However, you need to check with the lender to get more clarity.
How much loan amount can one get on an insurance policy?
While this may vary, most lenders offer 80 per cent to 90 per cent of the surrender value as a loan on the insurance policy. It must be noted that the loan will depend on the surrender value and not on the total sum assured of the policy.
What is the eligibility for such loans?
When compared with personal loans, the eligibility criteria for taking a loan against a life insurance policy are minimal.
What are the documents required?
The most important document required to apply for a loan against an insurance policy is the original policy document. Also, you need to provide your address, ID proof and other documents.
Can you get a loan against the LIC policy?
Yes. Just like other insurance providers, Life Insurance Corporation of India provides loans against an LIC policy. To apply for this, you need to fill out an application form. In the form, provide details like policy number, surrender value, and required documentation such as KYC. Once approved, you can receive the loan amount based on the surrender value of your LIC policy.