How you can get a loan against an insurance policy

Traditional insurance policies have a fixed maturity period.

- Jash Kriplani

Until these policies mature, policyholders cannot withdraw funds. However, if you are facing a temporary cash crunch and don't want to surrender your policy, a loan against it can be an option. Here is a look at how it works and why policyholders must be careful when opting for it.

Which policies are eligible? A loan can be taken against traditional policies like money-back, endowment, or whole-life policies, which offer a surrender value. "As soon as the policies acquire surrender value, they are eligible for policy loans. While insurers can't offer loans against unit-linked insurance plans (ULIPs) as per regulations, lenders do offer loans against ULIPs, including some who offer loans during the lock-in period," said Satprem Mohanty, co-founder of ValuEnable, an insurtech with a digital loan-against-policy platform.