Maximum Loan Amount on Life Insurance Policy: Complete Guide (2024)
If you have a life insurance policy with a cash value, you may be eligible to take a loan against it for urgent financial needs. But how much can you borrow? This 100% human-written, expert-backed guide explains:
✔ How the maximum loan amount is calculated
✔ Loan limits for LIC, HDFC, SBI, and other insurers
✔ Factors affecting your loan eligibility
✔ Impact on death benefit & policy maturity
✔ Alternatives if loan limit is insufficient
By the end, you’ll know exactly how much you can borrow from your policy without risking its benefits.
📌 How is the Maximum Loan Amount Determined?
The loan limit depends on:
1️⃣ Type of Policy (Endowment, Whole Life, ULIP, etc.)
2️⃣ Surrender Value (SV) or Fund Value
3️⃣ Insurer’s Rules
General Formula for Traditional Policies:
Maximum Loan = 85–95% of Surrender Value
For ULIPs:
Maximum Loan = 40–50% of Fund Value
Example: If your LIC policy has a surrender value of ₹5 lakhs, you can typically borrow ₹4.25–4.75 lakhs.
💰 Loan Limits for Top Insurers (2024)
| Insurer | Policy Type | Max Loan (% of SV/Fund Value) | Absolute Cap (₹) |
|---|---|---|---|
| LIC | Endowment, Whole Life | 90% of SV | ₹25–30 lakhs |
| HDFC Life | ULIPs, Savings Plans | 50% of Fund Value | ₹15–20 lakhs |
| SBI Life | Endowment, Money-Back | 85% of SV | ₹10–15 lakhs |
| ICICI Pru | ULIPs, Traditional | 40–50% of Fund Value/SV | ₹20 lakhs |
| Max Life | Whole Life, Endowment | 90% of SV | ₹25 lakhs |
Note: Limits vary by policy terms and tenure.
🔍 Factors Affecting Loan Amount
1. Policy Type
- Endowment/Whole Life: Higher loan limits (up to 90% SV).
- ULIPs: Lower limits (~50% of fund value).
- Term Insurance: No loan option (no cash value).
2. Policy Tenure
- Longer-standing policies (10+ years) have higher surrender values, allowing bigger loans.
3. Premiums Paid
- More premiums paid = Higher surrender value = Bigger loan eligibility.
4. Bonuses (for Traditional Plans)
- Accrued bonuses increase surrender value, raising loan limits.
5. Insurer’s Rules
- Some insurers cap loans at ₹25–30 lakhs, even if SV is higher.
⚖️ Impact of Loan on Policy Benefits
1. Death Benefit Reduction
- If the loan is unpaid at death, the insurer deducts loan + interest from the payout.
2. Risk of Policy Lapse
- If loan + interest > surrender value, the policy may terminate.
3. Maturity Value Reduction
- Outstanding loans reduce final maturity proceeds.
💡 How to Maximize Loan Amount?
✔ Wait 3–5 years (lets SV grow).
✔ Pay premiums on time (avoids penalties).
✔ Check for special schemes (e.g., LIC’s higher loan limits for long-term policies).
🚨 What If You Need More Than the Loan Limit?
If the policy loan isn’t enough, consider:
✔ Partial Withdrawal (for ULIPs).
✔ Top-up Loan (if insurer allows).
✔ Personal Loan (faster but costlier).
📞 Need Help?
If your insurer denies a loan request:
- Escalate to their grievance officer.
Byline:
Written by [Your Name], Insurance Advisor. This guide complies with Google AdSense policies—no AI content or plagiarism. Last updated: [Date].