Prices Increasing soon Prices Increasing Soon

How to Get a Loan Against Life Insurance Policy? 

In India, taking a loan against an insurance policy isn't widely known, primarily due to low awareness among policyholders. However, increased marketing efforts by loan providers have improved consumer awareness. Contemporary life insurance policies offer more versatility, extending beyond protection. Policyholders can now utilize their insurance policies to secure loans during financial crises.
 If you're considering this option and possess a life insurance policy, here are key details to be aware of:

Read more
Gets ₹1 Cr. Life Cover at just
COVID-19 Covered
The Policybazaar Advantage
Dedicated claim support for family FREE
Upto 10% discount for buying online
Only certified experts will call you on 100% recorded lines
We are rated~
6.7 Crore
Registered Consumers
Insurance Partners
3.4 Crore
Policies Sold

#All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply

By clicking on "View plans" you agree to our Privacy Policy and Terms of use

~Source - Google Review Rating available on:-

Life is Unpredictable! Protect your family’s future
Get ₹1 Crore Life cover starting from ₹384/month+
We don’t spam
Check Your Premium Now
Please wait. We Are Processing..
Get Updates on WhatsApp
The Policybazaar Advantage
Policybazaar Advantage Icon
Dedicated claim support for family FREE
Policybazaar team will help and support you at the time of claim. A personal claim handler from our team of experts will get in touch with you when your nominee applies for a claim on our website.
Policybazaar Advantage Icon
100% calls recorded to ensure no mis-selling
We will make sure you get what is promised by the advisors. We conduct regular monitoring of our calls to make sure you get the best experience.
Policybazaar Advantage Icon
Exclusive lifetime discount upto 5% for buying online
The discounts will be valid for the entire policy payment term and is not available if you choose to buy the insurance through offline agents.
Policybazaar Advantage Icon
Advisors available in your city
Our advisors are available in more than 55 cities across India and can help you at your doorstep in understanding the plans and in documentation.
Policybazaar Advantage Icon
Refund at the click of a button
In case you aren’t happy with your purchase, you can cancel your policy hassle-free at the click of a button. We will help you with the cancellation and refund of your policy.

What is a Loan Against Life Insurance Policy? 

A Loan Against Life Insurance Policy is a financial option where policyholders can borrow funds from their life insurance plans, primarily whole life or endowment policies, by using the policy’s accumulated cash value as collateral. Simply put, these are the financial securities you can utilise as collateral to opt for a loan. 

one crore term plan

Term Plans


Life Cover

@ Starting from ₹ 16/day+


Life Cover

@ Starting from ₹ 8/day+


Life Cover

@ Starting from ₹ 12/day+

Are All Life Insurance Policies eligible for availing loans? 

No, term insurance plan are not eligible for opting loans, as per IRDAI. However, you can avail of a policy loan against life insurance policy, such as endowment policies, whole life insurance plans and money-back policies. 

How much amount of loan can I avail of my life insurance plan? 

Instead of the policy’s total sum assured, the surrender amount is considered for availing such loans. The surrender amount is acquired only in case of paying a premium for plans for at least 3 years. Most banks provide 80% to 90% of the surrender value as an insurer’s loan. 

What are the benefits of a loan against life insurance policy?

Loan against insurance offers the following benefits:-

  • Banks do not check CIBIL scores when sanctioning loans against insurance. Therefore, this option is very useful for people with low CIBIL scores as you can get a loan without hassles.

  • Loan against insurance is one of the best alternatives to personal loans. On average, interest rates on a personal loan vary between 12% and 24%, whereas the interest rate on a loan against insurance is between 10.50% and 12.50%.

  • The documentation is minimal, and there are fewer chances of rejection. As a result, the loan gets sanctioned rather quickly.

one crore term plan

Secure Your Family Future Today


Term Plan Starting @ ₹449/month+

Get an online discount of upto 10%+

Compare 40+ plans from 15 Insurers

+Standard T&C Applied

What is the loan amount and interest rate?

The maximum loan amount depends on the type of life insurance policy and its surrender amount. The loan amount is generally a percentage of the policy’s surrender value. The loan amount can go as far as 80 -90% of the surrender value in the case of endowment or money-back plans. Various insurers consider around 50% of the total premium paid to compute the maximum loan amount. 

What is the interest rate for a loan against life insurance policy?

The interest rate for a loan against insurance depends on the amount and installments of premiums paid. The higher the premium amount and instalments, the lesser will be the interest rate. Usually, banks link the interest rate with their base rate. Life Insurance Corporation of India charges 9%, to be paid half-yearly, whereas Bank of India charges 13.15%.

What are the eligibility criteria for buying life insurance plans? 

The main eligibility criteria are to ensure that the type of life insurance plan you buy should be approved by your chosen lender for a loan. This facility loan is available to companies, partnerships, sole proprietorships and Hindu Undivided Families (HUF). 

How is your loan eligibility decided?

In the case of ULIPs, a loan against the life insurance plan is usually offered up to 70%–75% of the paid-up value. In traditional policies, it can go up to 85%–90%.

What tax benefits are available if the loan amount is used to buy or construct a house?

Interest on a loan against insurance is allowed as a deduction from income chargeable under the head ‘income from house property’. However, the insurer should use the loan amount to re-construct, repair or renew the property.

What happens if you fail to repay?

The insurer will give you a repayment schedule, though you can pre-pay or foreclose the loan without any charges. Repayment clauses vary from one insurer to another. If the insured fails to repay the loan, the policy will lapse. 

Any default in loan repayment can have a huge impact on the policy benefits. If the insured dies without repaying the loan, the insurer will provide death benefits to the beneficiaries after deducting the due amount and interest rate. If you fail to repay, the loan amount will increase due to the compounding effect, and the unpaid amount will be added to the outstanding principal amount. The policy is terminated when the outstanding premium and interest amount equals the surrender value. In this case, the policyholder will lose the insurance coverage.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

What is the drawback of mortgaging the insurance policy?

The biggest drawback in mortgaging your insurance policy is that if the policyholder dies during the term of the policy, the nominee will not get the full policy benefits. The lender will deduct the outstanding loan and interest before paying to beneficiaries.

How do you apply for a loan against life insurance policy?

The first step is to ask the insurance company or the bank about the eligible loan amount. The next is applying for the loan and assigning the policy to the insurance company/bank. It means all rights on the policy will be transferred to the lender. Then, mention the policy details and the loan amount in the lender's format. Banks charge processing fees and other charges in addition to the interest rate. The loan may be sanctioned in 2–3 days; however, it may vary from one company to another. Once the loan is sanctioned, all rights on the policy are automatically transferred to the lender after the loan disbursement. Upon loan repayment, the lender will reassign the policy to an insurer by an endorsement.

What documents are required while availing loan against life insurance policy?

You need to submit the following documents to avail of a loan against insurance:-

  • Original Insurance Policy

  • Deed of Assignment

  • Cancelled Cheque

Wrapping It Up! 

While the protection cover provided by a life insurance policy is its important benefit, the facility of loan is valuable additional benefit. Always go through the terms and conditions of the bank before applying for a loan against life insurance policy to avoid discrepencies in long time.


  • Q: Can I take a loan against a life insurance policy?

    Ans: Yes, policyholders can now take a loan against their life insurance plans in case of financial needs.
  • Q: What are the documents required for applying for a loan against a life insurance policy?

    Ans: Officially valid documents (OVD) for ID
    Address Proof
    Proof of the bank account
    Document Proof of the life insurance plan
  • Q: What is the processing time for a loan against a life insurance policy?

    Ans: The processing time for a loan against a life insurance plan is approximately 24 hours, i.e., 1 day, subject to submitting all the required mandatory documents.
  • Q: Is it a good idea to opt for a loan against my life insurance plan?

    Ans: You should always opt for a loan against the life insurance policy in case of a financial emergency.
  • Q: What are the benefits of taking a loan against a life insurance plan?

    Ans: Here are some of the benefits of taking a loan against a life insurance policy:
    • Avail it with less paperwork
    • Interest rates are low
    • Get a high-value loan
    • Quick disbursal
  • Q: What are the drawbacks of availing a loan against a life insurance plan?

    Ans: Here are some of the disadvantages of taking a loan against a life insurance policy:
    • The plan will lapse when defaulted
    • Availing of a loan on the life insurance plan after a 3-year waiting period
    • Might not avail loans for all types of plans
    • The amount availed as a loan will be limited in the starting policy years
  • Q: How much loan can I take?

    Ans: You can avail up to 80-90% of the surrender value of a plan.
  • How to calculate the term insurance premium online?

    Ans: You can easily calculate the term insurance premium online by using the term insurance premium calculator online tool
  • What are the benefits of term life insurance?

    Ans: Here are 4 common term insurance benefits:
    • Low premium rates
    • Tax Benefits
    • Death Benefit
    • Long term coverage
  • What is term life insurance?

    Ans: Let's understand what is term life insurance here. Term insurance offers financial protection for a certain period to the policyholder, thereby, offering a lump sum payout if the policyholder unfortunately passes away during the policy term.
  • What are the key features of a best term insurance plan in India?

    Ans: Below mentioned are the key features of a best term life insurance in India:
    • Affordable premium rates
    • Long-tenure life protection
    • Easy to understand and buy
    • Riders availability
    • Whole life protection
    • Tax benefits

Premium By Age

Life insurance articles

  • Recent Article
  • Popular Articles
24 Apr 2024

Most Common Life Insurance Frauds in India

Life insurance fraud is a financial crime that can be committed

Read more
09 Aug 2023

What High Net Worth Individuals (HNIs) Do To...

High net worth individuals often opt for life insurance plans to

Read more
28 Jun 2023

A Review Of ICICI Prudential Life Insurance

“Policy Bazaar insurance clarified the term policy for me, so

Read more
27 Jun 2023

A Review Of HDFC Life Insurance

“I recently bought an HDFC term plan and it is the best

Read more
20 Jun 2023

Best Life Insurance Policy in India with High...

The best life insurance policy in India is a type of life

Read more
15 Dec 2021

Life Insurance for Parents in India

With the increase in the average life expectancy rate, the older population in India is on the rise. Most of the

Read more
08 Jun 2022

Life Insurance for NRI

Going beyond geographical boundaries to study or pursue a career abroad is a common aspiration for many

Read more
14 Apr 2014

Life Insurance Quotes

Life insurance quotes are the approximate premium rates for the specific life insurance policy. It helps you

Read more
26 Dec 2022

Canara Guaranteed Fortune Plan

Canara HSBC life insurance company introduces a guaranteed fortune plan that provides assured benefits to life

Read more
27 Jun 2023

A Review Of HDFC Life Insurance

“I recently bought an HDFC term plan and it is the best decision I have ever made. I feel so good knowing that

Read more
Need Help? Request Callback
View Plans
Download the Policybazaar app
to manage all your insurance needs.