Life insurance policy not only gives you life cover, but you can also fulfill your financial needs by taking a loan on it. Life insurance companies make life insurance policies flexible in such a way that they can also serve as a financial investment option. Let us know how a loan may be taken on life insurance and what are its benefits.
Benefits of taking a loan on life insurance
Approval is immediately granted to take a loan on life insurance. You get an instant approval for the loan at the surrender cost of the policy. Along with this, interest rates are also lower than personal loans here. Here, the value of the policy also does not change with time and market, while the value changes when you take a loan on gold. The loan amount is not added to income by the Income Tax Department, so here you will get an exemption from tax.
Which policies can be availed of the loan
There are many types of life insurance policies. Such as term life whole life, endowment, ULIP, money back, etc., but loans cannot be taken from all the life insurance policies. For example, in term life plans, the loan cannot be taken on the policy, because it does not have surrender value or cash value. So first check whether a loan can be taken on your life insurance policy. If the life insurance policy holds this qualification, then you can take a loan only if you have paid the premium for around three years as a rule. However, in some companies, this period can be 6 months rather of 3 years.
What is the loan amount?
The policyholder does not have to go through any special investigation to get the loan approved on the insurance policy, as the loan amount in the guaranteed return plan is 80 to 90% of the surrender value. Talking about ULIP plans, not all ULIPs have loan facility. If someone offers a ULIP loan, then the loan amount is equal to the fresh value of the fund.
Rate of interest
The interest rate on insurance policies depends on the amount of premium and the number of premiums paid. The higher the premium and the higher the number of premiums, the lower the interest rate.