Insurance Blog

How to take loan on LIC policy

Loan can be availed on LIC products after completion of 3 years policy term. This feature is available with New endowment plan, New Jeevan Anand, Single Premium Endowment Plan, New Bima Bachat, New money back plan, Jeevan Labh, Jeevan Lakshya and New Bima Diamond. Loans won’t be given on children’s plans, pension plans, ULIP plans and terms plans.

For policies with 10 or more than 10 years of premium payment term, 3 full year premium should have been paid for the policy to be eligible to take a loan. For policies with less than 10 years premium payment term, 2 full year premium should have been paid.

Loan calculation:

Loan limit can be checked in the below link.

This amount has arrived by taking the last 15 years bonus history of LIC and this is just a approximate value.

Surrender value can be calculated from below link.

As a standard rate 80% of the surrender value can be taken as loan.

Interest rate:
Interest charged on loan against policy was pegged flat 9.5% per annum which would be compounded annually.

Loan re-payment:

The borrower will be given two options for loan re-payment.

1. He/she can repay loan with his own funds and continue the policy. This has to be paid before the policy term ends.
2. He/she can complete the premium payments and maturity amount will be given after loan deductions.

The loan value arrived would be too low if the sum assured is less or if  loan was taken as early as 3rd year because the surrender value would be very less and loan value will be still lower .So, taking loan when policy nearing maturity or taking higher sum assured will get you higher loan value.

Application Process:
Policyholder needs to submit a letter requesting for loan in home branch LIC, along with bank details to which the loan amount would be transferred through NEFT. This usually takes 7-10 days to release loan amount.