Why Should You Opt for a Loan against LIC Policy?

A loan against a LIC Policy is one of the most convenient ways of availing loans and fulfilling financial emergencies. These short-term loans come with a lower interest rate and also help solve the financial needs of Indian consumers.

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What Is A Loan Against LIC Policy?

Personal loans may be one of the quickest options when a financial emergency arises. Instead of taking out an expensive loan, one may consider another quicker option: a loan against a life insurance policy.

LIC offers loans against its insurance policy, which individuals can use for their own personal or commercial needs. The LIC Insurance Policy acts as collateral for the loan taken. If the policy matures and the loan is not repaid, any outstanding loan amount will be deducted from the maturity benefit. The death benefit is paid after deducting the loan amount for the policyholder’s death. 

Eligibility Of Availing Loans Against LIC Policy

To avail of loans on LIC Policy, you need to fulfill certain eligibility criteria that are:

  • 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 valid LIC policy wherein at least 3 premium payments have been made.

What Are The Advantages Of Loans On LIC Policy?

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

  • Higher Loan Amount

    LIC policyholders can borrow up to 80%- 90% of their surrender value, 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%.

  • Faster Disbursal of Loan

    The loan against an LIC Policy is disbursed comparatively faster, as no complicated paperwork is required. An individual can receive the loan amount within 3-5 days. 

  • Secured Loans

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

How Is A Loan Against LIC Policy Better Than Taking Other Loans?

Parameters Loans against LIC Policy Other Loans
Interest Rate 10-12% 12-15%
Process Easy and quick process. No documentation needed Lengthy paperwork and application process
Mortgaged Requirements No Guarantor or Security Required Security required

How To Avail A Loan Against LIC Policy?

An individual can apply for a LIC policy 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. The 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.

What Documents Are Required To Avail Loans against LIC Policy?

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

How To Repay Loans Against LIC Policy?

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:

  • Repay the principal amount along with the interest

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

  • Repay the interest amount yearly and repay the principal amount differently

Note: LIC can terminate the policy if the total debt amount due exceeds the surrender value. If the repayment period exceeds the policy tenure, LIC can deduct the loan amount from the policy's maturity amount.

Wrapping It Up

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


  • Q: What will happen if the policyholder takes a loan against the LIC policy and dies without repaying?

    Ans: If the policyholder passes away during the loan's term, the LIC deducts the interest rate and remaining loan principal from the amount of the claim settlement before paying the balance to the policy's beneficiaries.
  • Q: Can I avail of loans against LIC Term insurance?

    Ans: No, loans against LIC Term insurance are not available as these plans do not have any maturity value
  • Q: What is the current LIC loan interest rate?

    Ans: As of now, the current LIC policy loan interest rate 2022 is 10-12%, however, the interest rate that will be levied will vary.
  • Q: Are all LIC policies eligible for availing loans?

    Ans: No, not all LIC policies are eligible for loans. Whole life endowment plans, income plans, endowment plans, and unit-linked plans with maturity values are all eligible for loans. Loans against term plans are not eligible.
  • Q: How can I calculate the loan value against the LIC policy?

    Ans: The maximum loan amount sanctioned is up to 90% (up to 85% in case of paid-up policies) of the policy's surrender value, including the cash value of the bonus. The interest calculated on the LIC policy loan is payable half-yearly, and the minimum tenure for the policy loan is 6 months from its payment date.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
++Returns are 10 years returns of Nifty 100 Index benchmark

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