What is Loan Against Insurance Policy: Process, Documents, and How to Apply?

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.

• 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.

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.

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: