Why You Should Opt for Loan against LIC Policy?

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LIC offers loan against their various insurance policies to solve the financial needs of Indian consumers.

What is a Loan Against LIC Policy?

An individual requires a loan when they see it to be a suitable means to solve their financial crisis. But at times, opting for a loan can tend to cost more than they thought it to be. In such a situation, a loan against LIC Policy is their best option. LIC offers loan against their insurance policy, which individuals can use for their own personal or commercial needs. The LIC Insurance Policy acts as collateral for the loan taken.Any outstanding loan amount would be deducted from the maturity benefit if the policy matures and the loan is not repaid. The death benefit is paid after deducting the loan amount in the case of the policyholder’s death.  

Why Opt for a Loan Against LIC Policy?

5  reasons why one should opt for a Loan against LIC Policy :-

1. An individual can opt for a quicker process to obtain a loan against the security of their life insurance policy.

2. An individual does not need to cancel or surrender their insurance policy to avail of the loan. Hence, they can meet their expenses even as they keep their savings intact.

3. The documents required to avail of this loan are address proof, identity proof, and loan policy deed. Therefore, smoother process as no additional documents or credit score is required for the same.

4. Lower interest rates and higher loan amounts make it an irresistible offer to miss.

5. No processing fee or hidden charges 


Loan against LIC Policy is highly beneficial to the Indian consumer because:-

Higher Loan Amount

LIC policyholders can get up to 80%-90% of their surrender value as the loan amount. Therefore making it one of the most attractive options in the market.

Lower Interest Rates

Opting for a loan against LIC Policy will cost you lower interest rates compared to the usual 13-15% of interest for personal loans. The interest charged is calculated based on the total amount and the frequency with which the premium amount is paid. The higher the frequency and premium amount paid, the lower the interest rate. LIC offers around 10-12% interest rate for a loan against their policy.

Faster Disbursal of Loan

The loan against LIC Policy is disbursed comparatively faster as there is no complicated paperwork required. An individual can get the loan amount within a period of just 3-5 days. 

Secured Loans

As these loans are disbursed, taking their LIC policy as collateral, they are much more secured in nature.

Eligibility criteria

The eligibility criteria to opt for a loan against LIC Policy are as follows:-

  • The individual should be a citizen of India.

  • The person should be a minimum of 18 years old or above

  • The individual should be a policyholder and hold a LIC policy

  • The policy owned by the individual should allow loan facility

  • The policy owned by the individual should have acquired surrender value against which a loan can be taken up


The following documents are required to avail Loan against LIC Policy:-

  • The original documents of the insurance policy bond

  • The loan application for the same

  • The assignment deed where you allot the loan to LIC

  • Individual’s identity proof

  • Individual’s address proof

  • Individual’s income proof

Repayment Policies

Repayments of loans against LIC Policy are flexible as they are not paid in EMI’s. The loan tenure ranges from a minimum term period of 6 months to the maturity of the insurance policy. If an individual settles a loan within the minimum term period of 6 months, he/she is still liable to pay the interest for the entire duration of 6 months. An individual has the option to repay the loan using the following methods:

1. Repay the principal amount along with the interest

2. Settle the principal sum with the claim amount at the time of the maturity of the insurance policy. Hence, repay only the interest amount

3. Repay the interest amount yearly and repay the principal amount differently

Note: LIC holds the right to terminate the policy in case the total debt amount due exceeds the surrender value. If the repayment period exceeds the policy tenure, then LIC can deduct the amount of loan provided from the maturity amount of the policy.

Steps to Avail a Loan Against LIC Policy

An individual can apply for a loan using the following methods:-


  • Visit the nearest LIC branch office

  • Fill out the loan application form

  • Submit the required documents

  • Once processed, the loan will be disbursed within 3-5days


An individual can opt for an online loan process only if they are registered for premium services on the insurer’s website. Steps to be followed are:-

  • Visit the insurer’s website

  • Choose the tab 'Online Loan.'

  • The individual will be redirected to another web page

  • Click on ‘Through Customer Portal’ to request an online LIC loan

  • The individual would then have to provide their user id, DOB, and password to proceed to log in

  • Once logged in, the individual can choose which policy they want to avail of the loan against.

  • Proceed further to make a loan request

  • Once processed, the loan will be disbursed within 3-5 days

  • The loan documents can then be mailed to the registered email id for future references


  • The status of the loan policy can be checked online or via SMS or call

  • In case the repayment of the interest amount exceeds 30 days from the due date, LIC has the right to foreclose the policy to settle the loan amount

  • In case there is a case of the sudden demise of the policyholder, LIC has the right to deduct the loan amount as well as the interest from the claim settlement. After deduction, the remaining amount shall be sent to the beneficiaries of the insurance policy.

Wrapping it Up

Loan against LIC Policy has massive benefits as it is a trusted and reliable source and an easier process to avail secured loans with lower interest rates. A LIC policyholder, therefore, has an added advantage to secure their future along with easy accessibility to avail loans for the financial crisis.

Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.

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