A loan against your LIC policy is one of the cheapest and quickest ways to raise money in an emergency — and most policyholders do not realise they are sitting on it. Because the loan is secured against your own policy, the interest is low, there is no credit check, and your cover keeps running.
How it works
Once your policy has built a surrender value (usually after two to three years of premiums), LIC will lend you up to around 90% of that surrender value (about 85% for a paid-up policy). Your policy is assigned to LIC as security, but it stays in force — you keep the life cover and continue earning bonuses or guaranteed additions.
Why it is cheaper than most loans
Interest rates on LIC policy loans are typically far lower than personal loans or credit cards, because the lender’s risk is minimal. You pay interest (usually half-yearly), and you can repay the principal whenever you like — there is no fixed EMI schedule. Estimate what you could borrow and the interest on our Loan Calculator.
What to keep in mind
- If the loan plus interest ever exceeds the surrender value and the policy lapses, LIC can foreclose it — so keep the interest paid up.
- On maturity or a claim, any outstanding loan and interest are deducted from the payout.
- Only traditional plans (endowment, money-back, whole-life) with a surrender value qualify; pure term plans do not.
When it makes sense
A policy loan is ideal for a short-term need — a medical bill, a gap before a bonus, a small business requirement — where you would otherwise take an expensive personal loan or, worse, surrender the policy. It lets you access cash without giving up the plan you have been building. Check your numbers on the loan calculator.
Educational information, not individual advice. Confirm the current loan rate and eligibility with LIC.