What is Meant By Loans Against Insurance Policies

Life insurance policy can do many benefits as more than just give you an insurance cover. This insurance policy are very helpful to get loans to an individual. In early May 2020,The rates at which loans can be taken have been revised.Loans against the policy ‘Jeevan Shikhar’ are available at the 9%,Which can be said very lowest rate. On all other regular premium endowment plans and money-back policies launched after April 1, 2019, loans would come with a 9.5 per cent interest.But those opting for loan against single premium traditional policies – namely Jeevan Vridhhi (Plan 808), Jeevan Vaibhav (Plan 809), Jeevan Sugam (Plan 813), Jeevan Shagun (Plan 826), Jeevan Sangam (Plan 831) and Jeevan Utkarsh (Plan 846) – would pay the steepest interest rate of 10 per cent annually.

“The revised rate will be applicable on the new loans being availed by policyholders and there will be no change in respect of existing loans”.

Functions of loan against insurance policy:-

The loans against insurance policies are offering interest rate at 9-10 percentages, when compared with personal loans that come at a steep cost of 15% and Credit Card debt, which costs you 36%.The best part is that the insurance behemoth doesn’t consider the credit worthiness or the CIBIL score as a parameter for offering this loan as it is an advance paid against the policy’s maturity proceeds. However, income proof and bank statements apart from the original policy documents are required in processing for a loan.You can get a loan for up to 90 per cent of the surrender value of a policy, If the premium has been paid for three consecutive years, without any break.

Also, these loans are available only for endowment, whole life and money-back policyholders and not for term plans or ULIP customers.LIC offers loans against its policies for a minimum period of 200 days. Firms such as ICICI Prudential Life Insurance, HDFC Life, and Edelweiss Tokio Life too offer loans directly to their traditional insurance policyholders. You also have the option of taking a loan from any bank against the insurance policies, but the interest rate differs from bank to bank.The life insurer or the bank offering a loan against an insurance policy was ask for partial or full assignment of the policy says you can apply for loans against a policies by going online.