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The Long Read


Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)

No, you cannot take a loan against a term insurance policy.

Simple. See, whenever you take a loan, you will have to provide the lender with collateral (i.e., a valuable asset or assets that they can take from you if you fail to repay the loan amount within the stipulated time).

 

In loans against life insurance, the policy value is accepted as collateral. The policy value is the amount you invested plus any returns earned on this investment. If you cancel a policy at any time or survive the policy period, you will receive the policy value back.

 

But in the case of term insurance, there is no such maturity benefit, which means you’ll get nothing if you outlive the policy duration. So, if you don't repay your loan, the bank will get nothing from your term policy, if you are alive.

 

Therefore, in the absence of collateral, you can't get a loan against your term plan.

Life insurance policies have a policy value, i.e., the amount you invested, plus any returns earned on this investment. This policy value can be received if you discontinue the policy or survive the policy duration.

 

That’s why you can get a loan against such policies, where the value of the policy will be accepted as collateral by the lender.

Any savings and investment-oriented life insurance plan that gives a maturity benefit (such as endowment plans, income plans, etc.) can be used to take loans.

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