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Loan against ULIP Policy

Unit Linked Insurance Plans (ULIPs) offer more than just insurance and investment benefits—they can also serve as collateral for loans during financial emergencies. This lesser-known feature allows policyholders to borrow against their policy's surrender value without sacrificing their coverage. From simple application processes to competitive interest rates, this article explores how ULIP loans can provide quick access to funds when you need them most.

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Loan against ULIP Policy: All you need to know

Loan against ULIP Policy All you need to know
November 08, 2023

Table of Content

 

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!

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Here's all you should know about ULIP insurance.

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Disclaimer

The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year

For more details on risk factors, associated terms and conditions and exclusions please read sales brochure carefully before concluding a sale. Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. HDFC Life Insurance Company Limited is only the name of the Insurance Company, The name of the company, name of the contract does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.

18. Save 46,800 on taxes if the insurance premium amount is Rs.1.5 lakh per annum and you are a Regular Individual, Fall under 30% income tax slab having taxable income less than Rs. 50 lakh and Opt for Old tax regime.

** The past 5 year fund performance of HDFC Life Discovery Fund (SFIN: ULIF06618/01/18DiscvryFnd101) as on 30th November 2024. The benchmark taken into consideration here is is Nifty Mid Cap 100 which as a return of 26.77% as on 30th November 2024. HDFC Life Discovery Fund is available with HDFC Life ULIPs which comes with a life cover. Please note past fund performance is not indicative of future performance.

ARN - ED/10/23/5928

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