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- What is Loan Against Insurance Policy?

Written by
Kriti Arora
: Reviewed by
Bhaskar Sinha

Bhaskar Sinha
Insurance Expert
8+ years of experience in Life Insurance with expertise in Developing Life and Health Products, Digital Sales, Conducting effective trainings and Key Account Management.
Loan Against Insurance Policy Process: How It Works?
The LAIP, or Loan Against Insurance Policy, allows you to leverage your existing life insurance policy and generate cash reserves quickly. This is one of the biggest advantages of a life insurance plan, as it offers you the opportunity to liquidate an existing policy or policies in order to generate funds that you might need for personal, professional, and business purposes or some kind of financial emergency. However, the key point to remember here is that the process of loan approval happens only against the traditional life insurance models, which have endowment and money-back features. You cannot take advantage of this process for term insurance; however, few insurance providers approve LAIP for unit-linked policies.
A loan against insurance policy can be a smart choice if you need monetary help and do not want to touch your assets, savings, or equity investments. This process allows you to monetize a long-term financial security instrument for a short period of time. Another advantage offered by LAIP is that you will not be required to surrender or forego your policy to avail of the loan against it, and you are still eligible for the benefits from the life insurance policy, as applicable.
Loan Against Policy: Eligibility Criteria
- 1. The minimum age of the individual applying should be 18 years old.
- 2. The applicant must have a valid and active insurance policy.
- 3. The policy must be registered in the name of the borrower, and you cannot submit a third-party insurance policy as security.
- 4. All the insurance premiums must be paid till date.
Loan Against Policy: Documents Required
The key loan against policy documents that you need to submit when you apply for LAIP are:
- Duly filled out application form,
- Original policy documents,
- Passport-size photographs,
- Identity proof: passport, Aadhaar card, or voter ID card,
- Income proof: bank account statement, salary slips,
- Residence proof: Aadhaar card, driving licence, water or electricity bills and
- Any other document as required by the insurance company.
How to Apply for a Loan Against Insurance Policy?
You can easily apply for a loan against insurance policy, either online or offline. Below-mentioned are ways to apply for a loan against insurance policy in either way:
Offline Application Method
If you want to apply online, you will be required to visit the office of your insurance provider and fill out the application form. You will also need to submit the applicable KYC documents along with the original policy document. Once the insurance company verifies the details of the application, the loan amount, which is usually up to 90% of the surrender value of the policy, will be paid to you. This entire process of disbursal usually takes around 7-15 days to complete.
Online Method
If you apply through the online method, you can just log into your online insurance account and check whether your insurance policy is eligible for the Loan Against Insurance Policy scheme. Once you have confirmed your eligibility, you can check the terms and conditions, as well as important details like interest rates and features of the loan, online as well. Upon filling out and submitting the online application form, the insurance provider may require you to upload your KYC documents as well, or in certain cases, you will have to send the documents to the nearby office of the insurance company so that your loan application gets processed successfully.
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