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Guide

Loan Against Insurance Policy

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.

Typical borrowing limit
80 – 90% of surrender value

Only for policies that have acquired surrender value. Term plans do not qualify.

as of 2026-08-15· Insurer policy loan termsreported

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.

By Nishit Kumar, Founder & Editor
Updated 17 August 2026

What to know

Rates on policy loans are usually reasonable, and the process is simple because the insurer already holds the security. 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.

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.

Your numbers

₹50 L
₹10,000₹50,00,000₹20 Cr
18.5%36
120 years30
Monthly EMI
₹43,391
  • Principal48%
  • Interest52%
Principal
₹50,00,000
Total interest
₹54,13,879
Total payable
₹1,04,13,879
Interest as % of principal
108.28%
Growth over time
₹0₹27.3 L₹54.7 L₹82 L₹1.09 CrYr 1Yr 4Yr 7Yr 10Yr 13Yr 16Yr 19Yr 20
ValueAmount you put in

What this means.Over 20 years you repay more in interest than you borrowed. Cutting the tenure or prepaying early changes this sharply.

View the full breakdown (20 rows) →
YearPrincipal paidInterest paidBalance
1₹99,511₹4,21,182₹49,00,489
2₹1,08,307₹4,12,387₹47,92,181
3₹1,17,881₹4,02,813₹46,74,300
4₹1,28,300₹3,92,394₹45,46,000
5₹1,39,641₹3,81,053₹44,06,359
6₹1,51,984₹3,68,710₹42,54,375
7₹1,65,418₹3,55,276₹40,88,957
8₹1,80,039₹3,40,655₹39,08,918
9₹1,95,953₹3,24,741₹37,12,965
10₹2,13,274₹3,07,420₹34,99,691
11₹2,32,125₹2,88,569₹32,67,566
12₹2,52,643₹2,68,051₹30,14,923
13₹2,74,974₹2,45,720₹27,39,949
14₹2,99,279₹2,21,415₹24,40,670
15₹3,25,733₹1,94,961₹21,14,937
16₹3,54,525₹1,66,169₹17,60,412
17₹3,85,862₹1,34,832₹13,74,550
18₹4,19,968₹1,00,726₹9,54,582
19₹4,57,090₹63,604₹4,97,492
20₹4,97,492₹23,202₹0

At ₹50,00,000 over 20 years, Bank of Baroda holds the lowest advertised floor on our board.

Only these figures travel with you.

See Bank of Baroda’s terms

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.

Related reading

Sources

Every figure on this page is traced to the document it came from. Where a claim rests on a regulator or an institution’s own rate card, that is the link below — not a summary of it.

  1. [3]Home, personal, vehicle and education loan rate cards — August 2026— Lender published rate cardsas of 15 August 2026
Worth knowing.Rates, fees and terms change frequently and vary by applicant. Everything here is general information, not personalised advice. Confirm the current terms directly with the institution before you apply. How we research and rate.