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Home / Insurance and Loans

Insurance and Loans

You can be eligible for a loan from the end of your policy's second year in full force - on specific policies. From then on, you can raise loans annually with the loan limit rising steadily. You can use the loan money to pay the loan interest as well as the premium. After a certain period, the eligible amount will exceed the premium amount so you can use the excess to generate returns.

Insurance policyholders also have the benefit of deferring their loan payments until the policy matures. Then their liabilities can be deducted from the benefits receivable. Although interest needs to be paid regularly and without fail, its rates are as low as 10.5 percent.

Besides the loan benefits, there are various tax breaks that are afforded to the policyholder. You can claim a 20 percent rebate for paying premiums from your taxable income. If by chance, you expire before repaying the loan, then your dependents will receive the policy benefits after deduction of the balance loan amount.

Additionally, your policy can be leveraged as collateral towards banks or financial institutions to avail of loans from them. 

Assuming you have taken an Endowment Insurance (with profits - Plan No.14) policy with a Sum Assured of Rs.5 lakhs and a policy term lasting 20 years.

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