Loan against ULIP Policy: All you need to know

 

In this policy, the investment risks in the investment portfolio is borne by the policyholder 

It’s the dual benefit of life insurance and investment opportunity that has made Unit Linked Insurance Plans (ULIP) quite a rage among investors. But wait, did you know you can avail of a loan against your ULIP policy too? With a set of simple formalities, availing a loan against the ULIP can be an easy choice if you face a sudden financial difficulty or an emergency.

Before getting into the details of the loan, let us start with what exactly a ULIP policy is? A Unit Linked Insurance Plan combines the facilities of a life insurance and an investment avenue. A part of the premium builds the life cover while the rest is invested in a portfolio of either equities or bonds or a mix of the two, based on the financial goals and risk appetite of the policyholder. If with time, his/her priority, life goals or risk tolerance changes, ULIP offers the fund switch option for restructuring and reallocation of the investment.

In the course of the policy term, if you need a loan to meet an emergency need or fund an essential financial requirement, the same can be availed of against the surrender value of your ULIP. Thus, you need no collateral and get access to the money immediately.  

• How to get a loan against ULIP?

Getting a loan against your ULIP policy requires a few easy steps.

• Check the website for the eligibility criteria which depends on the policy tenure, surrender value and outstanding premiums (if any).

• The maximum loan amount that can be sanctioned is a certain percentage of the surrender value of your policy. The company assesses the fund structure of your portfolio and the surrender value to arrive at the figure.

• Once you are eligible for the loan, apply online, along with the relevant documents like the policy papers, identity and address proofs etc.

• The insurer reviews the application and documents and sends the approval. Afterwards, the loan amount is immediately disbursed to your specified account.

• Benefits of getting a loan against your ULIP

There are certain plus points of taking a loan against your ULIP policy. They are:

Faster disbursement:

With no collateral requirement and loan sanctioned against the surrender value of the policy, the disbursement is smooth and quick.

Retaining the policy:

Unlike assets, you don’t need to surrender your policy to get a loan. Thus, the benefits of the policy are still available to you while you utilise the loan to meet your urgent financial needs.

Flexible repayment:

A loan against the ULIP policy allows you to choose a repayment tenure according to your convenience. Hence, there’s no financial pressure.

Affordable interest rates:

Available against your ULIP policy, this loan comes with low and competitive interest rates, making it an affordable bet.

Easy prepayment:

The insurance companies don’t charge a penalty if you wish to complete the repayment of your loan before the scheduled time. That saves you from paying unnecessary interest.

The benefits and the easy disbursal make the loan against the ULIP policy a convenient and comfortable choice. If you have a ULIP policy and need to meet a financial urgency, you know what to do!

Related Articles: 

• ULIP Plan Charges You Must Know
• Different Types of ULIP Funds in India
• How to Withdraw ULIP Policy?
• 6 Tips to Maximize your Gains from ULIP 
• Understand how a ULIP calculator works
• ULIPs - Must you invest in them?

ARN - ED/10/23/5928