Before you surrender, pause and ask yourself:
“Do I really need to give up my protection to meet today’s need?”
Chances are, your policy can help you without losing its value.

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At that moment, many policyholders consider surrendering their policy to access cash. While it may seem like the easiest option, it often comes at a cost. An alternative, and often smarter choice is to take a loan against your life insurance policy.

‍What Does “Surrendering” a Policy Mean?

Surrendering means ending your life insurance policy before maturity. In return, the insurer pays you the surrender value, usually a fraction of what you’ve paid in premiums.

For example, if you’ve paid ₹3 lakh in premiums over 5 years, your surrender value might only be ₹1.5–2 lakh, depending on the policy type and tenure.
You also lose life cover and any bonuses or maturity benefits you would have received later.

So while surrendering gives you quick access to money, it comes at the expense of protection, future returns, and tax benefits.

‍What Is a Loan Against Policy?

A loan against life insurance allows you to borrow money using your existing policy as collateral — without ending it.
This feature is available for most traditional or ULIP policies that have acquired a surrender value (usually after paying premiums for at least 2–3 years).

You can typically borrow up to 80–90% of the surrender value, and your policy remains active. You continue to enjoy life cover, bonuses, and potential growth while meeting your liquidity needs

‍How Does It Work?

1. Apply for a Loan: You contact your insurer or lending partner (like SLiQ) and share policy details.
2. Valuation: The insurer determines your surrender value and eligible loan amount.
3. Approval & Disbursal: After verification, the loan is disbursed directly to your account, often within hours through digital platforms.
4. Repayment: You pay simple interest periodically, and can repay the principal anytime. Once repaid, the lien on your policy is removed.
   
   

Throughout this process, your policy remains yours - you do not lose ownership or coverage.

Comparison: Surrender vs. Loan Against Policy

Key Benefits of Taking a Loan Against Policy

• Quick and Hassle-Free: Minimal documentation; digital processes now make it seamless.
• Lower Interest Rate: Usually between 8–11%, much cheaper than personal loans or credit cards.
• No Credit Score Impact: The loan is backed by your policy, so approval is easier.
• Policy Remains Active: You stay protected and eligible for future bonuses.
• Flexible Repayment: Repay when convenient; there’s no strict EMI schedule.

Points to Keep in Mind

• Interest Accrues: Ensure timely interest payments so your policy doesn’t lapse.
• Loan Limit: You can only borrow up to the surrender value — not the entire sum assured.
• Outstanding Loan Impact: If the loan isn’t repaid and the insured passes away, the outstanding amount is deducted from the claim payout.
  
  

When Does It Make Sense to Surrender?

Surrendering might be reasonable only if:

• You can’t afford to pay future premiums and
• You already have adequate insurance coverage elsewhere, or
• The policy has very low value or poor returns and you plan to reinvest wisely.
  
  

Summary

Otherwise, it’s generally better to hold the policy or take a loan rather than end it prematurely.

Your life insurance policy is more than just a document — it’s a long-term safety net for you and your family.
Surrendering it might give you cash today, but it takes away the very protection you planned for.

A loan against your policy offers the best of both worlds, liquidity when you need it, and coverage that stays intact. With digital options like SLiQ, you can even check your eligibility, pledge your policy securely, and get funds within hours.

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