Millions of Indians hold life insurance policies for long-term financial security, yet very few realise that the same policy can be a powerful source of instant, low-cost liquidity. You can borrow money against your life insurance policy without surrendering it, breaking your investments, or disturbing your long-term financial goals.
What Is a Loan Against a Life Insurance Policy?
A loan against a life insurance policy is a secured loan where you pledge your policy as collateral to a lender — typically the insurer, a bank, or a specialised platform like SLiQ. The policy's surrender value (the amount you would receive if you cancelled the policy today) forms the basis for how much you can borrow.
Crucially, your policy remains in force. Your life cover continues, your family stays protected, and the policy keeps accumulating value — all while you access the funds you need.
This type of borrowing is particularly well-known among policyholders of LIC (Life Insurance Corporation of India), given LIC's large base of traditional endowment and money-back policyholders. Private insurers such as HDFC Life, ICICI Prudential, Tata AIA, and SBI Life offer similar facilities.
Only traditional policies with a guaranteed surrender value qualify: endowment plans, whole life plans, and money-back plans.
Term insurance plans do NOT qualify — they have no surrender value. ULIPs qualify after completion of the mandatory 5-year lock-in period.
Check with your insurer or SLiQ to confirm before applying. SLiQ also offers a special facility for ULIP policyholders still within the lock-in period — see the section below.
Who Can Apply?
You are generally eligible for a loan against your life insurance policy if:
- Your policy has acquired a surrender value — typically after paying premiums for at least 2–3 years (exact period varies by policy and insurer)
- You hold an eligible policy — endowment, whole life, money-back, or a ULIP that has completed its 5-year lock-in period
- Your policy is active and not lapsed
- You are the policyholder (not a nominee or assignee)
How Much Can You Borrow?
The loan amount is based on your policy's surrender value at the time of application, not the sum assured. The table below summarises key parameters:
| Loan Amount at a Glance | Limit |
|---|---|
| Active (in-force) policy | Up to 90% of surrender value |
| Paid-up policy | Up to 85% of surrender value |
| Basis of calculation | Surrender value + accrued bonus |
| Minimum loan tenure (LIC direct) | 6 months |
| Example: If your LIC endowment policy has a surrender value of ₹5,00,000, you can typically borrow up to ₹4,50,000. Use SLiQ's free eligibility checker to estimate your amount before applying. | |
Interest Rate on a Loan Against a Life Insurance Policy
This is one of the most searched questions — and the answer is more affordable than most borrowers expect.
| Lender / Source | Interest Rate (p.a.) |
|---|---|
| LIC (directly from insurer) | 9.00% – 10.00% |
| Banks (against insurance policies) | 10.00% – 15.00% |
| SLiQ platform | Starting at 9.99% |
| Typical personal loan (unsecured) | 14.00% – 24.00% |
Interest for LIC policy loans is typically compounded on a half-yearly basis. The rate is linked to the prevailing government bond (G-Sec) yield plus a spread, as approved by IRDAI. On a platform like SLiQ, the rate is transparently disclosed upfront.
Key Benefits of Borrowing Against Your Life Insurance Policy
Significantly cheaper than personal loans or credit card debt, saving you money over the loan tenure.
Digital platforms like SLiQ can process and disburse funds rapidly with minimal paperwork.
Since the policy itself is collateral, a low credit score typically does not disqualify you.
Your family remains protected throughout the loan period. The policy does not lapse merely because you borrowed against it.
Pay only interest during the tenure and settle the principal at maturity or repay in instalments — options vary by lender.
Typically, just your policy document, a KYC-compliant ID proof, and bank account details.
How to Apply: Step-by-Step
Whether you want to apply for a loan against your LIC policy online or through a branch, the process is straightforward. Through SLiQ, it is entirely digital:
- Check EligibilityLink your PAN and policy details to instantly see your eligible loan amount — no commitment required.
- Choose Your LenderSLiQ connects you with multiple lenders including banks and NBFCs, so you can compare and select the best rate.
- Complete Digital KYCVerify your identity in minutes — fully paperless, no branch visit needed.
- Digital Pledge of PolicyYour policy is assigned as collateral digitally; you sign the required declaration online.
- Funds in Your AccountOnce approved, the loan amount is credited directly to your bank account.
Why Thousands Choose SLiQ
India's leading digital platform for instant loans against securities — backed by Rainmatter (Zerodha's investment fund).
What About ULIPs?
ULIPs (Unit Linked Insurance Plans) combine life insurance + market-linked investment, helping you build long-term wealth while staying protected. Typically, you can take a loan against a ULIP only after completing the 5-year lock-in, once the policy has a surrender value.
But here's where SLiQ changes the game:
Important Things to Keep in Mind
- Policy at risk if you default: If the outstanding loan (principal + interest) exceeds your policy's surrender value, the insurer can terminate the policy. In case of maturity or death before full repayment, the outstanding loan is deducted from the payout.
- Interest accrues continuously: Monitor your loan regularly. Unpaid interest gets added to the principal, which can erode your policy's value over time.
- Compare before you commit: Rates and terms vary between insurers, banks, and platforms. SLiQ lets you compare lenders in one place.
- Term plans are not eligible: Pure term insurance policies have no surrender value and cannot be pledged as collateral. ULIPs are eligible once the 5-year lock-in is complete — and SLiQ offers a unique facility even during the lock-in period.
Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. Interest rates, eligibility criteria, and loan-to-value ratios are indicative and may vary by insurer, lender, and policy type. Please consult your financial advisor or insurer before making a borrowing decision. Data sourced from publicly available information as of April 2026.
