Now you will get loan against life insurance policy, know how and what will be the interest rate?

New rules of IRDAI: The Insurance Regulatory and Development Authority of India (IRDAI) has issued a master circular on life insurance. According to which, now the facility of policy loan is mandatory on all life insurance savings products. Meaning, now policyholders will get help in meeting their cash needs. The free look period for reviewing the terms and conditions has been increased from 15 days to 30 days for all policy holders.

IRDAI's new master circular is an important step in the series of reforms undertaken by the insurance regulator to keep the interests of policyholders in mind. Now, to encourage innovations, enhance customer experience and satisfaction, the insurance regulator has taken this step to simplify life insurance.

Partial withdrawal facility

Partial withdrawal facility is provided under pension products, which enables policyholders to meet important events in their lives such as higher education or marriage of children, purchase/construction of residential house/flat, medical expenses and treatment of critical illness. As per the new guidelines, life insurance companies are required to provide riders to provide wider options to policyholders.

Loan against insurance policy

Policyholders can take a loan against the insurance policy. Till now this facility was available only in traditional insurance policies. Which will now be available in life insurance policies as well. Notably, this type of loan is not given on Unit-Linked Insurance Plans (ULIPs) and Term Insurance policies.

How much loan will you get

Surrender value will be required to get a loan against the insurance policy. Usually 85 to 90 percent of the surrender value of the policy is available as a loan. In which the interest rates will be lower than other loans. Also the repayment period is flexible. In which the loan amount can also be deducted from the insurance claim settlement.

how to apply

There are a few things to keep in mind before applying for a loan against an insurance policy. For example, what is the surrender value of the policy and what is your loan requirement against that. You can apply for a loan by contacting the insurance company. Once the application is approved, 85 to 90 percent of the surrender value will be allocated as a loan.