You can borrow against a traditional endowment or money-back policy that has acquired surrender value — but not against a term plan, which has none. Before you do, work out what the policy is actually returning: many traditional plans yield in the mid single digits, and borrowing against a poor asset to avoid facing it is not a plan.
| Typical borrowing limit | 80 – 90 % of surrender value |
|---|---|
| What it means | Only for policies that have acquired surrender value. Term plans do not qualify. |
as of 2026-08-15 · Insurer policy loan terms · reported
What to know
Rates on policy loans are usually reasonable, and the process is simple because the insurer already holds the security — the same logic that makes a loan against FD cheap, and cheaper than most unsecured borrowing on our personal loan interest rates table. Unpaid interest is added to the outstanding, and if the total exceeds the surrender value the policy can lapse — which extinguishes the cover you were paying for. If dependants rely on that cover, that is a real risk, not a technicality. Where the sum needed is large, a loan against property keeps the insurance intact.
Take the opportunity to run the number you have probably never run: the actual internal rate of return on the policy itself. For many traditional plans it lands in the mid single digits over a long horizon. If that is the case, the question is not how to borrow against it but whether to make it paid-up and buy term cover separately. Work the repayment out in rupees first with the EMI calculator.
Frequently asked questions
Can I take a loan against a term insurance policy?
No. Term plans are pure protection and acquire no surrender value, so there is nothing to lend against. Only traditional endowment, money-back and whole-life policies with accrued surrender value qualify.
How much can I borrow against my LIC policy?
Typically 80–90% of the accrued surrender value, which depends on how many years of premium you have paid. Policies in their first two or three years usually have little or no surrender value.
What happens if I do not repay a policy loan?
Interest accrues and is added to the outstanding. If that total grows beyond the surrender value, the policy can be foreclosed and the cover ends. Any death benefit paid while a loan is outstanding is reduced by the amount owed.
Sources
- Lender published rate cards — Home, personal, vehicle and education loan rate cards — August 2026 — as of 2026-08-15
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