Everything You Need to Know About Loan Against LIC Policy

Learn how a loan against LIC policy works, who is eligible, and how the surrender value impacts the loan amount.
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3 mins read
16-January-2026

Life insurance is not just about protecting your family’s future. If you hold a ULIP or endowment policy, it can also help you meet urgent financial needs without breaking your long-term goals. With a loan against your insurance policy, you can borrow money by using your policy as security, all while continuing to enjoy the benefits it offers. Whether it is an emergency, a business need, or education costs tapping into the surrender value of your insurance policy can give you the liquidity you need, without hassle.

Need quick funds without breaking your investments? Get a loan against your ULIP or endowment plan with easy terms. Apply now

What is a loan against LIC policy?

In simple terms, this is a loan where you borrow against the value of your life insurance policy. But here is a key point, not all LIC policies qualify. We offer loans only against ULIP and endowment policies with a surrender value. This loan is secured, which means you can borrow at a lower interest rate. And since your policy stays active, you do not lose your life cover. You can borrow up to 80% of the surrender value and repay as per your convenience.

How loan against LIC policy works?

A loan against an LIC policy allows policyholders to borrow funds by pledging the surrender value of their life insurance policy as collateral. Instead of cancelling the policy, you can access liquidity while keeping the policy active and continuing to enjoy its long-term benefits. The lender offers a loan amount as a percentage of the policy’s surrender value, and interest is charged only on the borrowed amount. Here is how it typically works:

  • Eligible policies: Loans are usually available on traditional endowment policies and ULIPs issued by Life Insurance Corporation of India once they acquire surrender value.
  • Loan amount: You can borrow up to a fixed percentage of the policy’s surrender value, depending on policy type and lender norms.
  • Application process: Submit a loan request along with policy documents and identity proof. The policy is marked with a lien until repayment.
  • Interest and repayment: Interest accrues on the outstanding loan and can be paid periodically or adjusted against policy proceeds if unpaid.
  • Policy continuity: The life cover continues, but unpaid loan and interest may reduce maturity or death benefits.
  • Closure: Once the loan and interest are fully repaid, the lien on the policy is removed and full benefits are restored.

This structure makes a loan against an LIC policy a practical option for short- to medium-term funding needs without surrendering your insurance cover.

Why let your insurance policy sit idle? Put your ULIP or endowment plan to work when you need it most. Apply online in minutes

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Benefits of taking loan against LIC policy

To avail a loan against your LIC policy, you must meet certain criteria:

  • Quick access to money – Funds are usually disbursed faster than personal loans.
  • No need to surrender the policy – Your life cover remains active.
  • Lower interest rates – As the loan is secured, interest is often lower.
  • Flexible repayment – You can repay as a lump sum or in parts.

Eligibility criteria for loan against LIC policy

To apply for a loan against your insurance policy, make sure these points are covered:

  • Policy type: Must be a ULIP or endowment plan.
  • Surrender value: The policy should have built up a surrender value.
  • Policy age: Typically, the policy should be at least 3 years old.
  • Premium status: All due premiums should be paid up to date.
  • Loan amount: Usually up to 80% of the surrender value.

Factors influencing loan against LIC policy

Several factors decide the loan amount and terms:

  • Surrender value – This is the biggest factor.
  • Loan-to-value ratio – Usually 80% of the surrender value.
  • Interest rate – May vary slightly depending on the lender.
  • Policy tenure – Longer-tenured policies may offer higher values.
  • Repayment options – Flexibility in repayment adds to convenience.

Risks associated with loan against LIC policy

As with any loan, there are a few things to watch out for:

  • Interest keeps adding up – If not repaid on time, interest can grow.
  • Loan cap – You cannot not borrow beyond your policy’s surrender value.
  • Policy benefits impact – If you do not repay, it may affect your death benefit payout.

How to avail a loan against LIC policy?

You can choose between two methods, both simple.

Online process

  1. Visit the LIC website and log in.
  2. Go to the ‘Policy Loan’ section.
  3. Choose the eligible policy (ULIP or endowment).
  4. View your eligible loan amount.
  5. Fill and submit the online form.
  6. On approval, funds are transferred to your bank.

Offline process

  1. Visit your nearest LIC branch.
  2. Fill in the loan application form.
  3. Submit your policy, ID proof, and other required documents.
  4. LIC will verify and process the application.
  5. On approval, funds are credited to your account.

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Loan amount and interest rates for LIC policy loans

The loan amount and interest rate for an LIC policy loan depend largely on the policy type and its surrender value. Since the policy itself acts as collateral, these loans are generally easier to access and priced lower than unsecured borrowing options. Here are the key points to know:

  • Loan amount: Typically up to 90% of the policy’s surrender value, depending on whether the policy is an endowment plan or a ULIP.
  • Interest rates: Rates are usually lower than unsecured loans and may be charged at a fixed or variable rate, based on lender terms.
  • Interest calculation: Interest accrues only on the outstanding loan amount, not on the sanctioned limit.
  • Repayment flexibility: You can repay interest periodically or allow it to accumulate and get adjusted against maturity or death benefits.
  • Impact on benefits: Any unpaid loan balance and interest are deducted from the final payout, reducing maturity or claim proceeds.

Types of LIC policies eligible for loan

Not all LIC policies qualify for loans. Eligibility depends on whether the policy has built sufficient surrender value and meets lender-specific criteria.

Commonly eligible LIC policies include:

  • Endowment policies: Traditional savings-oriented policies that build surrender value over time and are widely accepted for loans.
  • ULIPs (Unit Linked Insurance Plans): Market-linked policies where loans are offered against the fund value, subject to minimum lock-in periods.
  • Paid-up policies: Policies that are no longer receiving premiums but continue to hold surrender value may also qualify.

Important exclusions:

  • Pure term insurance plans do not qualify, as they carry no surrender value.
  • Policies that have not completed the minimum premium-paying period are generally ineligible.

Loans against eligible policies issued by Life Insurance Corporation of India offer a convenient way to access funds without giving up long-term insurance protection.

What documents are required to avail loans against LIC policy?

Here is what you will need:

  • Filled loan application form
  • Original ULIP or endowment policy
  • Valid ID proof (Aadhaar, PAN, Passport)
  • Address proof
  • Cancelled cheque
  • Latest premium payment receipts

Loan against LIC policy vs other loan types

Below is the comparison between loan against LIC policy and other loan types

Feature

LIC policy loan

Other loans

Collateral

Yes – ULIP/endowment

No

Interest rate

Lower

Higher

Credit score needed

Not mandatory

Required

Loan amount basis

Based on surrender value

Based on income

Repayment flexibility

High

Moderate


LIC policy loan vs loan against securities

Compare insurance-based loans with those against shares or mutual funds to make an informed choice.

Feature

LIC policy loan

Loan against securities

Collateral

ULIP or endowment policy

Shares, mutual funds

Interest rate

Lower

Can be variable

Loan amount

Up to 80% of value

Up to 50%

Market risk

None

Yes

Credit score needed

Not required

Not required


How to repay loans against LIC policy?

Explore easy repayment options, from instalments to lump sum or claim-based settlement.

  • EMIs – Pay back the loan in instalments.

  • Lump sum – Repay the entire amount any time before policy maturity.

  • Claim adjustment – If unpaid, the balance is deducted from the final maturity or death benefit.

Final thoughts

A loan against your ULIP or endowment policy is a smart way to unlock quick funds without disturbing your life cover. It’s cheaper than personal loans, and far more flexible. Just remember repaying on time protects your policy benefits. If you're looking for low-cost funds with minimal hassle, this is an option worth considering.

Have a ULIP or endowment plan? Do not let it sit idle. Get a loan of up to 80% of its surrender value today. Apply now

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Frequently asked questions

Can I get a loan against my LIC policy?
Yes, you can get a loan against your LIC policy. The loan amount is typically a percentage of the policy's surrender value, allowing you to access funds without liquidating your policy.
Is taking a loan from LIC good?
Taking a loan from LIC can be beneficial due to lower interest rates compared to unsecured loans. Additionally, the loan process is straightforward, and you continue to receive life cover benefits while the loan is active.
Can I take a loan from a paid up LIC policy?
Yes, you can take a loan from a paid-up LIC policy. A paid-up policy with sufficient surrender value can be used as collateral for the loan, providing you with access to funds based on that value.
How much loan can I get from my LIC policy?

You can get up to 90% of the surrender value of your LIC policy (85% for paid-up policies). The exact amount depends on your policy type, premiums paid, and duration. Check your policy brochure or contact LIC for accurate loan eligibility.

What is the interest rate for LIC policy loan?

The interest rate on LIC policy loans typically ranges between 9% and 10%. This rate is charged on the loan amount and is usually compounded semi-annually. It’s lower than many unsecured loans as the policy itself acts as collateral.

Is it good to take loan against insurance policy?

Yes, taking a loan against your life insurance policy is a smart option for urgent financial needs. It offers lower interest rates, no credit checks, and doesn’t disrupt the policy benefits, allowing you to access funds without selling assets.

Can I close my LIC and get money-back?

Yes, you can surrender your LIC policy to receive the surrender value, provided premiums have been paid for at least three years. However, you may lose out on full benefits or bonuses if surrendered early. Evaluate alternatives like a loan before closing.

How much money will I get after 3 years of LIC policy?

After paying premiums for three years, your LIC policy gains surrender value. The amount depends on the type of policy, premiums paid, and bonuses accrued. You can check your surrender value in your policy conditions or contact LIC.

Does LIC loan reflect in CIBIL?

No, loans taken directly from LIC against policies typically do not reflect in your CIBIL score, as they are not reported to credit bureaus. However, if the loan is from a bank against a LIC policy, it may impact your credit report.

Which LIC policies are eligible for a loan?

A loan is generally available against LIC policies that acquire a surrender value, such as endowment and whole life plans. Pure term insurance policies are not eligible since they do not carry any cash or surrender value.

What happens if I fail to repay the loan on my LIC policy?

If you fail to repay, the outstanding loan and accrued interest continue to accumulate. Over time, this amount is deducted from the policy’s maturity or death benefit. In extreme cases, the policy may lapse if dues exceed value.

How long does it take to get a loan against LIC policy?

A loan against an LIC policy is usually processed quickly, often within a few working days. Timelines depend on document submission, policy verification, and internal checks by Life Insurance Corporation of India or the lender.

What documents are required for a loan against LIC policy?

You generally need the original policy document, completed loan application form, identity and address proof, bank details, and a cancelled cheque. Additional documents may be requested depending on policy type and lender requirements.

Does taking a loan reduce my policy’s maturity benefit?

Yes, if the loan or accumulated interest remains unpaid, it is deducted from the maturity or death benefit. If repaid in full before maturity, the policy’s benefits remain largely unaffected.

How does loan against LIC policy differ from personal loan?

A loan against an LIC policy is secured against surrender value, offering lower interest rates and easier approval. A personal loan is unsecured, usually costlier, credit-score dependent, and requires fixed EMIs from the start.

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