Most of us opt for Life Insurance to cover our family’s monetary needs after the sole breadwinner’s untimely demise. It is a form of investment out of which you get assured benefits. The Insurance Plan cushions our families when they need it the most, if the sole earner of the family is the insured one. The policy stands strong by the family in desperate times of need.
The Life Insurance Policy takes care of the family in case of financial crunch. It takes care not only after your death but also when you are alive. When in need of money we obviously run to a bank to avail loan. There is a lengthy process one has to go through to seek even a minimum amount. Plus too many documentation is required. Some banks may not give you the preferred interest rate and the other may not provide you with flexible repayment options. So, here we bring to you one more option which you cannot over look. Loan against your Life Insurance Policy. Some of the Life Insurance policies which are unit - linked, money back and endowment plans help you raise funds when in debt. In short, your life insurance policy will be considered collateral till your loan is paid back.
1. The loan amount - The loan amount depends on your life insurance value, especially the surrender value. The loan amount varies from insurer to insurer. But the maximum you can avail is up to 90% of the surrender value.
2. The waiting period - One cannot grab a loan as soon as he buys the policy. There is a waiting period after which you can access the option of loan. The premiums should be regularly paid at least for 3 years then only your eligibility criteria is fulfilled.
3. Documentation - The Life Insurance company will enlist the documents required to submit for the loan process. A procedure needs to be followed, where you fill a form with all the necessary details and documents. There may be a need to sign an agreement which states that you are taking a loan against the policy.
4. The Rate of Interest - The interest depends on the premiums paid to the company till date. The interest rate will definitely be lower than that of banks or personal loans. More the premium amount paid in the policy duration, more favourable your interest rate will turn out to be.
5. Premium - The premiums stay as it is. You have to keep paying the premiums even after availing loan against your policy.
6. The Repayment - Its mandatory to repay the loan within the term of your policy. You can either pay the principle amount or pay the interest. At the time when policy matures the loan amount will be adjusted with the total claim settlement.
The main purpose of a Life Insurance policy is to cover your family members from financial burden in case of your death. Availing a loan against your life insurance policy might be a great option but the policy lapses if you are a defaulter.
Endowment Plan - This article lists down the benefits of endowment plan in your life insurance poicy which also helps you in selecting the best endowment policy
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In this blog post, we shall discuss some important questions every insured need to ask their agent advisor before fixing the right choice for themselves and their family members.
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