Skip to main content

Taking Loan on your Insurance Policy

 

Ever sat in front of a slot machine in Las Vegas and had the fancy thingamajig spew out your future winnings by just willing it to?

Well, you have something that comes close in the world of insurance. And, it's called 'Loan against Insurance'.

In these days of three-in-one and four-in-one plans, financial products too are keeping themselves abreast with the changing trends. Life insurance, which was traditionally a simple protective cover, is a four-in-one instrument today, combining coverage, investment, tax benefits and loan facility.

Loan against life insurance is not as popular as personal loans, and many people keep away from it.

Reason?

They don't know about it!

So, how to secure a loan against your insurance policy?

Loan against life insurance is easily available today and all major life insurance companies as well as private and public sector banks are offering it. As the insurance policy is taken as a security here, this loan is cheaper than unsecured loans like personal loans.

How is your loan eligibility decided?

Not all insurance policies are eligible for a loan option. Life insurance plans like endowment policies, money back plans and Unit Linked Insurance Policies (ULIPs) are eligible for loans while term insurance plans are not eligible for any loans. This is because a term plan does not have any cash value associated with it and the plan expires at the end of the term with no returns, unlike other plans.

Non-term plans for which the premium paid on time and for a minimum period of three years are eligible for a loan option.

Loans against life insurance are usually offered up to 70-75% of the paid up value for unit linked plans, while it can go up to 85-90% for traditional plans with guaranteed returns. Unlike personal loans, the borrower's income is not a criterion here for deciding the loan eligibility. However,the credit worthiness of the borrower will be taken into account after checking his credit score.

What are the documents required?

To avail a loan against your life insurance policy, you will need to file in an application in a pre-prescribed format. You will have to submit the original life insurance policy, and sign a deed of assignment stating that the benefits of the insurance policy will be assigned to the bank or insurance company during the loan tenure.

The policy will effectively act as a collateral security till the loan amount is repaid. Banks also seek payment receipts of future premiums and a cancelled cheque leaf to complete the documentation for loan against life insurance policy.

How can I repay the loan?

The repayment options for a loan against life insurance can differ for companies and banks. Life Insurance Corporation for example, offers loans with a minimum tenure of six months. Even if you wish to repay it before six months, you will have to pay interest for the full six months. Most companies and banks offers loan for the remaining policy term and can prepay the loan without any charges.

What is the applicable interest rate for loans against life insurance policy?

The rate of interest for a loan against life insurance is decided based on the premium paid and the number of premiums paid. The more the premium amount and the numbers, the lesser will be the rate of interest. Also lesser will be the rate traditional plans.

Banks usually link the rate of interest with their base rate. As banks consider this loan as an overdraft against the pledging of an insurance policy, it can be expensive than the loans offered by life insurance companies. Life insurance Corporation of India currently charges a rate of interest at 9% to be paid half-yearly. The interest rates of bank loans vary from 10% to 14% and are based on the type of insurance.

Things to know before applying for a loan against insurance:

Before applying for a loan against insurance, there are certain factors that you must keep in mind.

  • The loan has to be repaid during the term of the policy. In the event of any default in the loan repayment, any claim will be considered only after deducting the outstanding amount.
  • Some insurers terminate the policy in the event of non-payment of a subsequent premium of the policy after taking a loan.

Instead of opting for a personal loan, a loan against life insurance is easily available with lower rate of interest making it a useful tool without losing your life cover.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

Invest in Tax Saver Mutual Funds Online -

Invest Online

Download Application Forms

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

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

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

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

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Popular posts from this blog

NRIs and direct taxes code (DTC)

DTC Proposes To Do Away With Special Provision That Allows NRIs Liberalised Duration Of Stay In Country      THE new direct taxes code could bring a large number of global Indians under the tax net, as it does away with a provision that allowed individuals to escape tax in any country citing double tax avoidance.    The new legislation, introduced in Parliament on Monday, says an individual shall be a resident of India in any financial year if he is in the country for more than 59 days in that year, and has been has been India for more 365 days in four preceding financial years. A number of Indian industrialists including Vedanta's Anil Agarwal and Essar's Ravi Ruia have acquired non-resident status over the years.    The DTC has only attempted to clean up the provision in line with the laws globally. A phrase "being outside India" in the existing income tax law exempted individuals who stay outside the country for six months from paying taxes. This was prone ...

Stick to Good Fund Manager who Can Multiply Your Investment

A manager may be the difference between the best and worst funds. Here's how you can find the right one    Does a mutual fund manager make a difference to your investment? The answer may not be as easy as you think, since most best-performing mutual funds have moved away from individualistic fund management to process-driven methods, limiting the scope of an individual's role in investment decisions. In fact, many fund managers would speak at length about how the "system" their fund house has in place makes their task of picking stocks easy even though it restricts their freedom. Still, the question is important, especially after recent reports that the Securities and Exchange Board of India ( Sebi ) may ask fund managers to disclose to investors their track record of managing money. Let us take a look at the universe of large-cap funds over the past five years. According to Value Research, an independent mutual fund tracking firm, the topper in the category is DSP...

Tata Fixed Income Portfolio Fund dividend

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)       Tata Mutual Fund has announced dividend under the dividend option of Tata Fixed Income Portfolio Scheme B2 Plan A-DQ, Tata Fixed Income Portfolio Scheme B2 Reg-DQ and Tata Fixed Income Portfolio Scheme B2 Direct-DQ. The record date has been fixed as August 29, 2013. Happy Investing!! We can help. Call 0 94 8300 8300 (India) 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 in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C. Invest Tax Saving Mutual Funds Onlin...

Bear markets may kill, but bulls always return with vengeance

Average Gain Between Any Two Downturns Has Been 186% IF you have lost a fortune in shares by now, the best way to make it up perhaps could be by buying some more. Since the Great Depression of 1929, the world has undergone 12 major bear market phases. The average bear market has lasted about 22 months, and the market has fallen by an average of 51%. However, the average gain during the bull market between any two downturns has been an eye-popping 186%. The index here in question is the S&P 500. Bull markets — after every recessionary phase — have always been good for investors. All major bull rallies since end-1930 have resulted in markets gaining between 50-500%. Historic numbers show that the magnitude (size or breadth) of a bull market is much heavier than that of a bear market. The million dollar question is: Are we at the threshold of another bull market rally? Markets could go up intermittently, but convincing rallies will take time to happen. The current bear phase is...

IDFC Classic Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   IDFC Classic Equity Fund IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index. Performance YTD 1-Year 3-Year 5-Year Since Inception IDFC Classic Equity 0.93 26.61 6.30 1.01 11.65 BSE 200 1.52 17.31 6.00 1.99 12.98 All figures in % as on January 31, 2013; Returns above one-year in CAGR terms ...
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