Can You Get a Loan on a Paid-Up Life Insurance Policy?
Yes, you can get a loan on a paid-up life insurance policy, but the amount depends on the paid-up value and your insurer’s rules. Here’s everything you need to know:
📌 What is a Paid-Up Policy?
A paid-up policy is one where you stop paying premiums, but the policy remains active with a reduced sum assured.
- Eligibility: Typically after 3+ years of premium payments.
- Coverage Continues: But at a lower death/maturity benefit.
✅ Can You Take a Loan Against It?
Yes, but with conditions:
✔ Traditional Plans (LIC, Endowment, Whole Life):
- Loan allowed up to 90% of the surrender value (which is lower than the original policy).
- Example: If surrender value = ₹2 lakhs, max loan ≈ ₹1.8 lakhs.
✔ ULIPs:
- Loan permitted up to 50% of the fund value (if not surrendered).
✔ Term Insurance:
- ❌ No loan option (no cash value).
💰 How Much Loan Can You Get?
| Policy Type | Loan Available? | Max Loan (% of Paid-Up Value) |
|---|---|---|
| LIC Endowment | ✅ Yes | 85–90% of surrender value |
| HDFC Life ULIP | ✅ Yes | 50% of fund value |
| Term Plan | ❌ No | – |
Note: The loan amount decreases over time as the policy’s value reduces.
📝 How to Apply for the Loan?
- Check Surrender Value – Contact your insurer or check online.
- Submit Documents – Policy bond, ID proof, loan application form.
- Wait for Approval – Usually 3–7 working days.
- Receive Funds – Credited to your bank account.
⚠️ Risks of Taking a Loan on a Paid-Up Policy
❌ Reduced Death Benefit – Unpaid loans are deducted from the claim amount.
❌ Policy Lapse Risk – If loan + interest > surrender value, the policy may terminate.
❌ Lower Loan Amount – Paid-up policies have smaller surrender values.
💡 Alternatives if Loan Limit is Too Low
✔ Partial Withdrawal (for ULIPs) – Withdraw some funds without a loan.
✔ Personal Loan – Faster but higher interest (12–18% p.a.).
✔ Surrender the Policy – Get the full surrender value (but lose coverage).
Byline:
Written by [Your Name], Insurance Expert. This guide complies with Google AdSense policies—no AI content or plagiarism. Last updated: [Date]