If you are holding a LIC of India Policy, you are virtually holding a Qualification that will grant you some Loan when need arises. Not only does LIC grant loan for its endowment policies, many financial institutions, like Bank’s and NBFC’s grant Loans’ with your LIC Policy as a surety. Hence, you can either contact your LIC policy serving branch or check with your Banker to avail loan against LIC policy.
If you take loan from LIC, interest will be charged at 10% (wef 1 April 2012) that has to be paid Semi annually. Normally, the Corporation will grant loans of up to 90% of the Policy Surrender value.
LIC provides loan for a minimum period of 6 months. If you need loan for any period less than 6 months, you’ll have no option but to pay interest for 6 months. But, in case the policy matures or the LA dies in these 6 months, interest will only be calculated from date of loan grant till the date of maturity/ death.
When the use is met and you have sufficient funds, you can repay the loan amount along with the interest at any time. Or, you can continue to only pay the Interest half yearly, and let the loan amount be deducted at the time your LIC Policy claim.
As said before, you can also get loan from a bank using your insurance policy as a collateral. The amount of loan you can get in this way is entirely up to the bank and the interest rate charged will be according to the on going bank rates.
Check eligible loan amount online
Recently, LIC has begun displaying the eligible loan in their customer portal.
Just enroll your LIC policy at LIC portal and visit the ‘Loan and Bonus’ link to know the amount. As you can see, along with the loan amount, you may also see Bonus amount accrued by your policy (in case your policy is eligible for bonuses) till date.
An example of the Bonus and loan section of the LIC portal is shown here (Policy number is edited).
Update: 12 June 2012: It appears that LIC of India have taken off this feature to check loan eligibility and accrued bonus from their online portal. I do not know why they have done so but obviously it is not for some good reason (atleast that I can think of). It was such a nice feature, instead of asking someone, policy holders could themselves know the amount of bonus their policies have accrued and the loan amount eligible. I would like to call it lack of transparency. I only hope they add it back in the future.
Now if you want to know the same, you would have to either call them or visit your branch.
Update 2: 15 June 2013: For all policies that are eligible for bonus, I can now see the amount displayed in the portal as ‘Vested Bonus’. This is a good move and I hope they bring back the Loan Eligibility amount too.