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When crises hit, having access to fast, low-interest credit can be a true fiscal savior. If you’re a Life Insurance Corporation of India (LIC) policyholder, you may not be aware that your policy is capable of doing more than just guaranteeing your loved ones’ future—it can also assist you in fulfilling short-term financial requirements.
A loan against an LIC policy enables you to borrow against the surrender value of your policy, offering a secured and hassle-free source of finance without the need to sell valuable assets such as gold, property, or investments.
Here’s all you need to know about this loan — interest rates, eligibility, benefits, and application process.
WHAT IS A LOAN AGAINST LIC POLICY?
A loan against an LIC policy is a secured loan that is provided to policyholders who have eligible LIC endowment or money-back policies with an acquired surrender value. The surrender value is the sum you get if you voluntarily stop your policy before maturity.
This option lets you borrow against the surrender value, and LIC keeps your policy as security until the loan is paid back in full.
MAIN FEATURES OF LOAN AGAINST LIC POLICY
- Interest Rates: Dependent upon LIC’s current lending rates and your credit rating. Typically lower than in the case of unsecured personal loans.
- Loan Limit: Maximum 90% of the surrender value for in-force policies; 85% for paid-up policies.
- Covered Policies: Only endowment, money-back, and whole-life plans with loan facility are eligible to be used.
- Security: Your policy is held as security; LIC holds it till repayment in full.
- Policy Impact: In default, LIC may foreclose the policy or restructure the loan against maturity/surrender proceeds.
- Loan Tenure: Minimum of 6 months.
- Prepayment: Permitted after a minimum of 6 EMIs.
ELIGIBILITY CRITERIA FOR LOAN
In order to avail a loan against your LIC policy, you should:
- Be an Indian citizen.
- Be at least 18 years old.
- Have a valid LIC policy with acquired surrender value.
- Have paid a minimum of 3 years of premiums in full.
LIC POLICIES ELIGIBLE FOR LOAN
Some LIC plans which provide loans are:
- Jeevan Pragati
- Jeevan Labh
- New Endowment Plan
- Single-Premium Endowment Plan
- New Jeevan Anand
- Jeevan Rakshak
- Limited Premium Endowment Plan
- Jeevan Lakshya
(Note – Not all policies provide a loan facility, so choose wisely.)
HOW TO APPLY?
1. Offline Process
- Go to the nearest LIC branch.
- Fill up the loan application form.
- Submit the KYC documents (ID and address proof) and the original policy bond.
- LIC will check your eligibility and release the loan accordingly.
2. Online Process
- Register on LIC’s official website under e-Services.
- Log in to verify policy eligibility for a loan.
- Submit the loan form and upload necessary documents.
- Physical documents can still be submitted at the branch.
IMPORTANT TERMS AND CONDITIONS
- Loan tenure should be a minimum of 6 months.
- Interest should be paid periodically to prevent foreclosure.
- In the event of the policyholder’s death, interest is only up to the date of death.
- LIC can cancel the policy if the loan + interest is more than the surrender value.
- At maturity of the policy, LIC will adjust the outstanding loan first before paying the balance.
CONCLUSION
A loan against your LIC policy can be a wise means of fulfilling unforeseen financial requirements without sacrificing long-term wealth or tapping into savings. With low interest rates, fast disbursal, and flexible repayment, it’s a solution that keeps your financial objectives on track while resolving short-term issues.
But never forget—repayment on time is important. Delay in EMIs or default can lead to your policy being cancelled or your benefits being cut.
Explore this option wisely and consult with LIC or financial advisors before proceeding.