Compare & Buy Car, Bike and Health Insurance Online - InsuranceDekho
Claim, renew, manage & moreLogin
  Hurry Up!
Save tax in 80C by purchasing a Life Insurance Today View Plan

Want To Borrow Money From Your Life Insurance Plan: Learn How?

Updated On Nov 15, 2022

A perpetual life insurance policy's cash amount can easily be used as collateral for a loan. The money can be utilised for any purpose and repaid anytime you choose, and there are no loan conditions or criteria, and a life insurance policy mortgage offers comparatively low interest rates. The negative? You could jeopardise your policy and incur a significant tax burden if you don't pay the loan's interest. Borrowing money from your life insurance plan is a simple way to have access to money, provided you can make your payments on time.

 Want To Borrow Money From Your Life Insurance Plan: Learn How?

Borrowing Money With The Help of A Life Insurance Plan

A life insurance policy's cash amount is the sum of money you would get if you terminated the coverage. A portion of the premium for a cash balance life insurance plan, like whole or comprehensive life insurance, is applied to the cash amount each time you make a premium payment.


At a rate of interest determined by the terms of the policy, the cash amount increases over time. If your continuous life insurance policy builds up a cash amount, you may be able to obtain a loan from the insurer and use the cash as security. The cash amount of your life insurance coverage must first accumulate to a certain amount before you can use this option, which could take five to ten years of premium payments.


How Much Amount to Borrow?

The amount you can draw from a life insurance plan varies depending on the insurer, but generally, there is no minimum loan requirement and the highest policy loan amount is at least 90percentage points of the cash amount. 

 You do not deduct money from your account's cash amount when you seek out an insurance loan. Instead, you're borrowing money from the insurance and using nothing more than the financial value as security. This is a huge advantage because the cash amount is still included in the life insurance coverage and is still earning interest.

 Unlike many other types of loans, this one does not need repayment within a predetermined time frame. The yearly interest, which may be set or variable, will be charged to the balance of your existing loan if you fail to pay the insurer.


Paying Back the Loan

You do not have to repay a debt taken out against your life insurance policy. Additionally, if the total amount owed does not surpass the policy's cash amount, you are exempt from paying the annual interest. Therefore, if you're unsure of how much longer you'll need the money, drawing through your life insurance plan is a great choice.

 Now, it usually works in your favour to repay an insurance debt as soon as you can. The loan's interest accrues annually, and if the balance is too high, the policy will expire. If this occurs, you would have paid premiums totaling thousands of dollars without anything to show for it. If the balance of the loan is larger than the premiums you have paid, you can also owe taxes.



Along with its death benefit, perpetual life insurance that builds cash may also offer some living benefits. One of them is the capability of borrowing against the policy's cash amount. Unlike other kinds of borrowing, when you obtain a loan on your program, your provider lends you the money and uses the funds in your policy as leverage rather than taking any funds directly out of the plan itself. This shows that the policy's cash value keeps rising thanks to dividends. 

Also Read: Why is Money Back Considered As a Safe Investment?


This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

Popularly Opted Term Insurance Sum Assured

People Also Read

Must BuyMust Buy

Why to Buy Life Insurance Policy Online from InsuranceDekho

  • Tax benefit upto 1,50,000*
  • Claim support everyday 10AM-7PM
  • 50 Lacs+ happy customers
Find the right life insurance for you
By clicking, I agree to *terms & conditions  and privacy policy.
Find the right life insurance for you
By clicking, I agree to *terms & conditions  and privacy policy.