Loan Against LIC Policy: Everything You Need To Know
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Loan Against LIC Policy: Everything You Need To Know

LIC of life insurance corporation is the biggest public sector insurance company in India. Not only does it offer insurance plans of various types, but it also allows you to take a loan against LIC policy. Such a loan is loan by LIC of India is no different from any other loan that can be used to meet expenses like higher education of your child, home renovation, wedding, or a medical emergency.

A loan against LIC policies is a kind of a secured loan that requires you to submit your insurance papers as collateral. In case you failed to pay off the loan, the LIC of India reserves the right to hold your policy back.

List of Plans Eligible for Loan Against LIC Policy

You are eligible for a loan against LIC policy if you have any of these LIC policies:

  • Jeevan Pragati
  • New Jeevan Anand
  • Jeevan Labh
  • Jeevan Rakshak
  • Single Premium Endowment Plan
  • Limited Premium Endowment Plan
  • New Endowment Plan
  • Jeevan Lakshya

What are the Key Features of a Loan Against LIC Policy?

  • Only LIC endowment policyholders can take this loan
  • This loan is an advance equivalent al to the policy’s surrender value, approximately up to 90% of this value, which for a paid-up policy is up to 85%.
  • The insurer requires you to submit the policy papers as collateral, which means the insurer can withhold the policy if you fail to pay off the loan
  • Since not all LIC policies are eligible for a Loan against the policy. Therefore, choose a policy wisely and think about your future expenses too.
  • The interest rate subject to this loan variant from 9 to 11 percent.
  • LIC reserves the right to terminate your policy if the debt amount exceeds the policy’s surrender value.
  • In case the LIC policy matures before the loan tenure is over, LIC deducts the payable amount from the policy’s maturity amount.

What are the Benefits of a Loan Against LIC Policy?

The following are the key benefits:

Loan Amount

The amount of loan you can take is based on your LIC policy’s current surrender value. It can be a small amount to finance your trip or good enough to sponsor your child’s higher education.

Low Interest Rate

The interest rate associated with a loan against LIC policies is low as compared to other loans. The rate of interest typically ranges from 9 to 11 percent, which is payable semi-annually (twice a year).

No Credit Check Required

You can avail a loan against your LIC policy even if you have a low credit score. As per LIC of India, a credit check is not required for this type of loan.

Quick Disbursal

Since almost zero paperwork needed for processing this type of loan, you can expect a quick disbursal to your account and that too without any hassle.

Flexible Payment

A loan against life insurance policy allows you to repay the interest to principal and interest in a flexible manner so as to support your uneven installment (if any), which is unlike most of the loan types.

No processing/prepayment fee

You can get a loan against your LIC policy without having to pay a processing fee or even prepayment charges in case you have the amount. This indeed saves you a big amount on your loan.

What is the Eligibility Criteria for a Loan Against LIC Policy?

The following is the eligibility criteria for the loan:

  1. You must be an Indian resident
  2. You should have a LIC endowment policyholder
  3. There should be a certain surrender value of the policy
  4. You must have paid premiums for at least 3 years
  5. You must be at least 18 years old

In case you meet the above criteria, you can seek a loan against your life insurance policy.

What are the Documents Required for a Loan Against LIC Policy?

The following is a comprehensive list of documents required for a loan:

  1. You must submit original papers of your insurance against which you seek a loan.
  2. Submit one identity proof, viz. Aadhaar Card, Passport, Voter ID Card, Utility Bills
  3. Submit one residence proof, viz. Aadhaar Card, Driving License, Voter ID Card, Utility Bills (electricity/telephone/water, etc.)
  4. Submit a copy of your income proof, viz. Salary slip or Bank Statement/Passbook
  5. A deed of assignment (a document that verifies transfer on ownership of a property)

What are the Terms & Conditions for a Loan Against a LIC Policy?

The following are some important terms & conditions to follow when seeking a loan against your LIC policy:

  1. You must have a LIC endowment policy (opens in a new tab/window)
  2. The minimum tenure applicable to such a loan is 6 months
  3. You should have paid at least 6 EMIs before you can opt for loan prepayment (valid for long-term loans)
  4. In case of your (policyholder’s) demise during the policy term, the LIC will calculate the interest till the date of death.
  5. If the policy matures during the loan tenure, you can pay off the loan with the maturity amount.

How to Repay the Loan Against a LIC Policy?

Before you apply for a loan against your LIC policy, you must know that the minimum tenure applicable is 6 months, whereas the maximum tenure is subject to the maturity date of your plan. Besides, you must pay at least 6 EMIs or interest for 6 months before you can prepay the loan amount.

You can choose any one of the below ways to pay off your loan:

  • Pay interest in addition to the principal.
  • Pay interest for some time (at least 6 months) and then settle the loan when you can sufficient money.
  • You can also pay the interest applicable in monthly EMIs and then settle the whole principal with the maturity amount.


If you had a question like ‘how to get a loan against LIC policy?’, I have answered it in this post. To submit an application for a loan, follow the process as we have discussed above for quick and easy disbursal. Remember, always choose your loan amount wisely and take exactly the amount that you need.

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