FAQs on taking loan against LIC policy

• Follow

If you are in need of money but high-interest rates pose a challenge, then you can apply for a loan against your life insurance policy. Life Insurance Corporation (LIC) and other insurance companies give you a loan facility by keeping your life insurance policy as collateral. Here are a few important questions you should ask before taking a loan against your life insurance policy.

1) Is my LIC policy eligible for a loan?

Not all insurance policies are eligible for loans. For example, you cannot take a loan against a term insurance policy. Similarly, a loan is not available against all unit-linked insurance policy. If you want to avail a loan against your policy first read the policy document to know if it is eligible for a loan against your life insurance policy.

2) What documents are required for a loan against LIC Policy?

Before applying for a loan keep these documents handy:

• Original policy document • Identity Proof: Aadhaar Card, Voter ID Card, Passport • Residence Proof: Aadhaar Card, Voter ID Card, Utility Bills, etc • Income proof: Bank Account Statement, Salary Slips, • Assignment deed

3) How to apply for a loan against LIC Policy?

You can either apply online by registering at LIC e-Services where the interest rates along with other terms and conditions are provided to you. You may also be required to upload KYC documents before getting the loan application processed. You can also go to the nearest branch of LIC and fill out the loan application form.

4) How much loan can be taken against LIC policy?

LIC policy generally sanctions up to 90% of the surrender value of the policy. If the policy is paid up then the loan limit is lower at 85% of the surrender value.

5) How much interest is charged against LIC policy?

The policy loan interest rates are in the range of 10% – 12%. Compared to banks, LIC charges a low interest rate for a loan taken against LIC policy. The rate also depends on the type of the policy and your record with the company.

6) What happens if the policyholder dies during the tenure of the LIC loan?

If the policyholder dies during the tenure of the loan then claim settlement is paid after deducting interest and outstanding loan amount.