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Loans - How to avail loans against an insurance policy

28-May-2012

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If one has a life insurance policy, one can take a loan against it from the insurance company. The amount depends on the type of policy and the period for which the policy has been in force. The interest charged, which is available at a lower rate, the period of the loan and the terms of repayment are decided by the insurer. The loan is a percentage of its surrender value. In the case of traditional policies, the proportion of the surrender value available as loan may be as high as 90%. If an insurance company provides a loan against Ulips, the value will depend on the type of fund.

Loan application

The application has to be made by the policyholder in the format prescribed by the insurance company. The details of the policy, the policyholder and the loan applied for have to be provided in the form.

Assignment

The policy against which the loan is taken will be assigned to the insurance company as a security till the loan is repaid. The assignment will be executed by the policy holder and has to be endorsed on the policy.

Repayment

The loan amount and interest have to be repaid during the term of the policy. If the interest is not paid, it is added to the principal and interest is charged on it. Any claim or benefit payment will be made after deducting the outstanding amount.

Points to note

I. Since the loan amount is linked to the surrender value of the policy, it will be low in the initial years of the plan.

II. The policy may be terminated if the outstanding loan and unpaid interest exceeds the surrender value of the policy. The policyholder will lose the insurance cover in such a case.

III. If the application is made for a subsequent loan, the earlier loan and interest on it is deducted from the loan value and the balance is paid.

The content courtesy: Centre for Investment Education and Learning (CIEL)

Source : ET back

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This site is the responsibility of www.ecrmagicdo.com

We want you to

feel comfortable using our web sites
feel secure submitting information to us
contact us with your questions or concerns about privacy on this site
know that by using our site you are consenting to the collection of certain data

web server and stored on your hard drive
an IP address, assigned to the computer which you use
the domain server through which you access our service
the type of computer you're using
the type of web browser you're using

We may collect the following personally identifiable information about you:

name
email address
ZIP/Postal code
demographic profile (like your age, gender,occupation and education);
financial information (like annual income or insurance policy number); and
opinions of features on our websites.

help us provide personalized features
tailor our sites to your interest
get in touch with you when necessary

We use contact information internally to:

direct our efforts for product improvement
contact you as a survey respondent
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send you promotional materials

Generally, we use anonymous traffic information to:

remind us of who you are in order to deliver to you a better and more personalized service from both an advertising and an editorial perspective
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we have your permission
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require disclosure

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