Skip to main content

Loan against Insurance

 

Loan against Insurance



The news that Life Insurance Corporation (LIC) of India has recently surpassed banks as the largest personal loan lender has turned the focus on insurance policies as collateral.

Apart from LIC, other life insurers like ICICI Prudential Life and Edelweiss Tokio Life, and several banks, including the State Bank of India (SBI), ICICI Bank and HDFC Bank, offer loans against pledging of life insurance policies.

The Procedure

Loans are granted only against traditional policies like endowment and money back policies that have life cover along with savings element in them. Term insurance covers and unit linked insurance plans cannot be pledged to secure loans against them. Policies must acquire surrender value -the amount you would get if you terminate the policy after a certain years -to qualify for loans. You must assign the policy in favour of the insurer to get a loan.

Typically, insurance companies offer loans up to 85-90% of the surrender value. LIC charges an interest rate of 10%, to be paid every six months.

The repayment schedules are flexible, with LIC giving you the option of paying only the interest amount and allowing the loan amount to be deducted from the claim amount at the time of settlement. If you are seeking a loan from a bank by pledging your policy, the interest rate and repayment procedure will vary as per the bank.

The Benefits

Clearly, loan against an insurance policy can offer succour to policyholders during emergencies with minimum documentation. The interest rate is a shade lower than what banks charge for their secured loans and significantly cheaper than personal loans. The flexible repayment schedule -and the option to allow the loan amount to be deducted from the claim amount -is a good enough reason for it to be your top choice during a crisis. Then, there are other benefits. For one, you need not worry about the application being rejected or delayed.

There is no question of verifying the credit risk of the person and setting the interest rate for him / her. For people with low credit scores, this is a very good option. Also, these days, LIC is giving the loan in seven days

The biggest risk is that you may not have the insurance cover when you need it.

If the policyholder dies while repaying the loan, his / her dependents will not be the sole beneficiaries of the insurance cover. The lender will have the right to deduct the loan amount plus interest from the proceeds.

If you don't have plans to repay the loan immediately, it will be a great idea to shop for term cover to safeguard the interests of your family.

Online term plans are cheaper -a one crore cover costs just . 6,000-10,000 a year, depending ` on your age, policy tenure and life insurance company. Also, it is best to secure a loan from your insurer rather than approaching banks to pledge your policy.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
      2. Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...
Read more

ICICI Lombard to provide weather cover in 10 states

ICICI Lombard General Insurance Company has been given the mandate to provide weather-based crop insurance for rabi season (2010-11) in Madhya Pradesh, Bihar,Tamil Nadu, Karnataka, West Bengal, Chhattisgarh, Jharkhand and Himachal Pradesh.    The insurance company will cover 69 districts — 30 loanee districts (farmers who have taken loans) and 39 non-loanee districts. The major crops that ICICI Lombard covers for the season are winter paddy, cotton, wheat, mustard, barley, maize, onion, potato, tomato, lentil, peas, arhar, jowar, fenugreek, coriander, cumin, methi, isabgol, brinjal among other crops.    Weather-based crop insurance provides cover against weather-related risks such as excess or deficit rainfall, variations in temperature and fluctuations in humidity. This scheme facilitates immediate compensation based on certified data collected from independent third party bodies such as Indian Meteorological Department ( IMD ) and National Collateral Management Services Ltd. ( NC...
Read more

Lump Sum or SIP?

Invest Mutual Fund Online     You have a lump sum in hand and you wish to invest in equity funds. However, you have heard a lot of talk about investing in equity funds through Systematic Investment Plans (SIPs) because they help average costs, ensure you do not ill-time the market, and help you invest in small sums, besides giving you many other advantages. So, should you invest the money you have in hand in one go, or let it remain in your bank account and then do an SIP? There is no harm in investing a lump sum amount. For all you know, compounding, over the long term, could work better with lump sum. However, make sure you fulfill all of these three criteria if you want to invest in one go. Else, SIP is the way to go. #1: You invest for the long term According to past data, ideally, if you have a time frame of 12 years or more, you can consider lump sum investing (provided you satisfy the other two conditions that follow). So, what is the sanctity behind 12 years? Is it because only...
Read more

Stock Market Concepts: Derivatives and taxation

DERIVATIVES refer to an instrument, which derives its value from the value of something else — that is, an underlying asset. In India, the derivatives space has traditionally been the playground for large institutional investors who use it for hedging or for speculative activities. However, with time, we have seen a steep augmentation in the per capita income of an average Indian. Consequently, the appetite for investment in alternative instruments has transcended into the need to explore untested territories, and one of the most lucrative of all the available options, is the derivatives. Taxation Of Derivatives: Let's have a sharp overview of how taxability impacts the dealings in futures and options: Futures: Since, there is no transfer or delivery of the underlying asset in case of futures, the income or loss from it cannot be taxed under the head "capital gains". Therefore, depending upon the fact whether the assessee is a trader or an investor, the head of income...
Read more

Mutual Fund Review: Reliance Regular Savings Balanced

Reliance Regular Savings Balanced fund has shown great resilience during market crash After a shaky start, this fund has established itself as a strong contender in this space. In the past three years it has ridden the market well by not only delivering during the market run-ups but also displaying resilience during the crash. In 2008, it witnessed the second lowest fall among its category and last year it was amongst the top three performers with a return of 76 per cent (category average: 61%).   The poor underperformance in 2006 can well be credited to the low equity allocation of the fund, which stood at just over 10 per cent for only four months that year. Though the fund has the leeway to go up to 75 per cent in equity, it has never touched that limit. In fact, it has exceeded 70 per cent in just five months in its entire history. During the crash of 2008, the fund managers had no problem going right down to 54 per cent (equity exposure). Fund managers Omprakash Kukian and A...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now