Loan Against an LIC Policy: How It Works
Eligibility, process and key considerations before taking a loan against your LIC policy.
Which Policies Qualify
Savings-oriented LIC plans — endowment and whole life plans that acquire a surrender value — generally qualify for a policy loan once they've run for a minimum period. Pure term insurance plans, which have no surrender value, typically do not qualify.
How Much You Can Borrow
The maximum loan amount is generally a percentage of the policy's surrender value, per LIC's current rules for that plan — ask your agent for the current applicable percentage and rate.
Interest and Repayment
Interest accrues on the loan at a rate set by LIC (revised periodically). The loan can be repaid over time, or left outstanding — in which case the accrued loan and interest are deducted from the eventual maturity or death benefit.
When a Policy Loan Makes Sense
A policy loan can be a relatively quick source of funds against an asset you already own, often with simpler documentation than other borrowing options — but the impact on your eventual policy benefit if left unpaid is worth weighing carefully before deciding.
Frequently Asked Questions
The death benefit or maturity benefit is generally reduced by any outstanding loan and interest at the time of claim, so it's worth factoring this in.
Processing time depends on the servicing branch and your specific policy, but is often faster than many other loan types since it's secured against a policy you already hold.
Have a Question About Your Own Situation?
General guides are a starting point — share your specifics for a considered answer.