How Much Loan Can I Get on an LIC Policy?
If you've been paying premiums on your LIC policy for a few years, you may be eligible for extra benefits you didn't know about. Instead of breaking your savings or surrendering your policy, you can borrow against your LIC plan to meet emergencies, medical bills, education fees, or short-term business needs, while your life cover stays intact.
This article will tell you how much loan you can get on an LIC policy, how it's calculated, and what you need to know before applying.
What Is a Loan Against an LIC Policy?
A loan against an LIC policy is a secured loan where your policy itself acts as collateral. LIC (or a partner lender/NBFC) advances you money against the policy's surrender value, which is the amount you'd receive if you discontinued the policy before maturity.
Instead of losing your policy and its long-term benefits by surrendering it, you pledge it and borrow a percentage of that surrender value. Your life cover continues as long as premiums and loan dues are paid.
How Much Loan Can You Get?
This is the key number most people want to know:
- In-force (active) policies: You can typically borrow up to 90% of the surrender value.
- Paid-up policies (where you've stopped paying premiums but the policy still holds reduced value): The limit is usually up to 85% of the surrender value.
- Some lenders and NBFCs (Non-Banking Financial Companies) cap this lower, at 75–80% of the surrender value, depending on their own risk policies.
Example: If your policy's surrender value is ₹5,00,000, you could get a loan of roughly ₹4,25,000 to ₹4,50,000 (85–90%), depending on whether the policy is active or paid-up.
For ULIP or endowment plans specifically, a surrender value of ₹1,00,000 could translate to eligibility of up to ₹90,000.
What the Loan Amount Depends On
The loan amount depends on:
- The policy's surrender value (not the sum assured)
- Whether the policy is in-force or paid-up
- Number of years of premiums already paid
- Outstanding premiums or charges, which get deducted before the final loan amount is fixed
- The specific lender's loan-to-value (LTV) policy, since it can vary between LIC directly and partner NBFCs/banks
Minimum loan amounts also exist and typically start from around ₹25,000, varying by insurer.
Which LIC Policies Are Eligible?
Not every LIC policy qualifies for a loan. The general rule:
- Eligible: Traditional endowment plans, whole life plans, and ULIPs, because these build up a cash/surrender value over time.
- Not eligible: Term insurance plans (like pure protection plans) do not qualify, since they offer only life cover with no investment or savings component, hence no surrender value to borrow against.
LIC Plans and Their Loan Eligibility
| LIC Plan | Plan Type | Loan Facility Available? | Approx. Interest Rate (p.a.) |
|---|---|---|---|
| LIC New Jeevan Anand | Endowment | Yes | ~9–10% |
| LIC Jeevan Labh | Endowment | Yes | ~9–10% |
| LIC Jeevan Umang | Whole Life | Yes | ~9–10% |
| LIC New Endowment Plan | Endowment | Yes | ~9–10% |
| LIC Jeevan Lakshya | Endowment | Yes | ~9–10% |
| LIC Bima Jyoti | Endowment (Guaranteed Addition) | Yes | ~9–10% |
| LIC SIIP | ULIP | Yes | ~9–10% |
| LIC Jeevan Shanti | Annuity Plan | Varies (limited/not standard) | N/A |
| LIC New Jeevan Amar | Term Plan | No | N/A |
| LIC Tech Term | Term Plan | No | N/A |
| LIC Saral Jeevan Bima | Term Plan | No | N/A |
LIC revises its policy loan interest rate periodically (generally around 9–10% p.a., charged every six months). When borrowed through a bank or NBFC instead of LIC directly, rates can range between 8% and 12% p.a. depending on the lender. Loan facility and rates can vary by plan variant and policy year, so it's best to confirm eligibility for your specific plan directly with LIC or check your policy document.
Eligibility Conditions for a Loan Against LIC Policy
Before applying, make sure you meet these basic criteria:
- The policy must have acquired a surrender value — this typically happens only after 2–3 years of regular premium payments.
- The policy should be active (in-force), not lapsed or cancelled.
- All premiums must be paid up to date, with no pending dues.
- You must be the policyholder/proposer (the person who originally purchased the policy).
- You must generally be 18 years or older at the time of application.
- The policy should have been in force for at least 6 months in most cases.
Interest Rate on LIC Policy Loans
One of the biggest advantages of this loan type is the comparatively low interest rate versus a personal loan.
- LIC's own loan-against-policy interest rates typically start around 9–10% per annum, revised periodically by LIC.
- When borrowed through banks or NBFCs, rates generally range between 8% and 12% per annum, depending on the lender and policy terms.
- Interest is usually charged/compounded every six months.
- Rates from private lenders may also depend on prevailing government bond yields and your credit profile.
How to Apply for a Loan Against Your LIC Policy
LIC offers both offline and online routes:
Offline Process
- Visit the nearest LIC branch where your policy is serviced.
- Request and fill out the loan application form.
- Submit the required documents (see below).
- LIC verifies the surrender value and processes the loan.
Online Process
- Log in to the LIC customer portal (or the relevant lender's portal if going through a bank/NBFC).
- Select the policy you want to pledge.
- Fill in the loan application and upload documents digitally.
- Funds are disbursed after verification — this route is usually faster with minimal paperwork.
Documents Required to Claim a Loan Against an LIC Policy
Here are the documents needed to claim a loan against your LIC Policy:
- Duly filled loan application form
- Original policy bond/document
- ID proof (Aadhaar, PAN, Voter ID)
- Address proof (utility bill, Aadhaar, passport, driving licence)
- Bank account details/passbook or statement for disbursal
Repayment Terms
Repayment on an LIC policy loan is fairly flexible:
- You can pay only the interest regularly and repay the principal later, or
- Repay both principal and interest together as a lump sum at your convenience.
Note: If interest isn't paid on time, the unpaid amount gets added to the outstanding loan and may be deducted from your policy's benefits or surrender value. If the total outstanding (principal + accumulated interest) exceeds the surrender value, the policy risks lapsing, and you could lose your life cover.
Why Consider a Loan Against Your LIC Policy?
You should consider taking a loan against your LIC policy because:
- Lower interest rates than most unsecured personal loans
- No credit score check in most cases, since it's a secured loan
- Quick disbursal, especially through the online route
- Your life cover continues, unlike surrendering the policy
- Flexible repayment, with no fixed EMI structure in many cases
Conclusion
A loan against your LIC policy is one of the most underused financial tools available to policyholders. If you have an eligible plan-endowment, whole life, ULIP, or similar cash-value policies, you can unlock up to 90% of your surrender value without breaking your policy or losing your life cover. It's faster than a personal loan, doesn't require a credit check in most cases, and comes at a noticeably lower interest rate.
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