Loan Against LIC Policy: Rates, Process & Eligibility
Loan Against LIC Policy: How to Get a Loan Using Your Insurance Policy in 2025
If you hold a life insurance policy from LIC or a private insurer, you may be sitting on a valuable financial asset you can borrow against. A loan against a life insurance policy lets you access funds at low interest rates without surrendering your policy or disrupting your coverage.
Overview of Loan Against Life Insurance Policy
Most traditional life insurance policies (endowment, money-back, and whole life plans) accumulate a surrender value over time. Once your policy has a surrender value, you can pledge it to the insurer or a bank and get a loan up to 80-90% of the surrender value.
LIC (Life Insurance Corporation of India) directly offers loans against its own policies through its branches. Private insurers like HDFC Life, ICICI Prudential, and SBI Life also offer this facility. Banks like SBI and HDFC Bank also provide loans against LIC policies as collateral security.
Interest Rates
| Lender | Interest Rate (Per Annum) | Max Loan Amount |
|---|---|---|
| LIC (against LIC policy) | 9.00% – 10.00% | Up to 90% of surrender value |
| SBI (against LIC policy) | 9.50% – 11.00% | Up to 85% of surrender value |
| HDFC Bank | 10.00% – 14.00% | Up to 85% of surrender value |
| ICICI Bank | 10.50% – 14.00% | Up to 80% of surrender value |
LIC offers some of the lowest rates for loans against its own policies, making it the most cost-effective option if you hold an LIC policy.
Eligibility
- You must hold a life insurance policy with surrender value (typically after 3 years of regular premiums)
- The policy must be in force (premiums up to date)
- Term insurance policies and unit-linked insurance plans (ULIPs) are generally not eligible
- Endowment, money-back, and whole life policies are most commonly eligible
- You must be the policyholder (or have a No-Objection Certificate from the policyholder if the policy has an assignee)
Documents Required
- Original policy bond document
- Loan application form (from LIC branch or bank)
- Aadhaar card and PAN card
- Address proof
- Assignment deed (for policies with nominees or existing assignments)
- Latest premium payment receipt
Application Process
Loan from LIC Directly
Visit the LIC branch where your policy is serviced. Submit the original policy bond, completed application form, and KYC documents. LIC calculates the current surrender value, determines the eligible loan amount, and sanctions the loan. The money is typically credited to your bank account within a few working days.
Loan from a Bank Against LIC Policy
You can also approach a bank like SBI or HDFC with your LIC policy as collateral. The bank will request an assignment of the policy in its favour. Once LIC confirms the assignment, the bank disburses the loan. This process takes slightly longer but may offer a higher loan amount in some cases.
Repayment
You can repay the loan at any time before or after policy maturity. If the loan is not repaid by policy maturity, the insurer deducts the outstanding loan amount from the maturity payout. If the loan balance (including interest) exceeds the policy’s surrender value at any point, the policy may lapse.
Frequently Asked Questions
After how many years can I take a loan against my LIC policy?
For most LIC endowment and money-back plans, a surrender value is acquired after 3 years of regular premium payment. From that point, you are eligible to apply for a loan against the policy.
Can I take a loan against a ULIP (unit-linked insurance plan)?
No. ULIPs are investment-linked products and do not have a guaranteed surrender value in the same way traditional plans do. Most insurers and banks do not offer loans against ULIPs.
Will taking a loan affect my life insurance coverage?
No. Your life insurance coverage remains intact as long as the policy is in force (premiums are paid) and the loan plus interest does not exceed the policy’s surrender value. The coverage amount is not reduced by the loan.
What is the typical processing time for a loan against LIC policy?
LIC typically processes these loans within 3 to 7 working days. Banks may take slightly longer (7 to 14 days) due to the additional step of assigning the policy in the bank’s favour.
