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Loan Against ULIP Policy
Over the years, ULIP policies have gained recognition as an effective investment instrument that combines the elements of insurance and wealth creation. However, beyond their investment potential, these policies also offer an additional advantage by providing policyholders with the ability to avail loans against the accumulated value of their ULIP holdings.
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- Zero LTCG Tax¶
- In built life cover
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- Loan Against ULIP Policy
Let’s discuss the benefits as to why you should consider loan against ULIP policy.
What is a ULIP?
A ULIP is a unique financial product that combines the benefits of insurance and investment. It offers you the opportunity to grow your wealth while providing a life cover to protect your loved ones. ULIPs allow you to invest in various funds based on your risk appetite and financial goals, giving you the flexibility to choose between equity, debt, or balanced funds.
What are the Benefits of Availing a Loan Against ULIP Policy?
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Quick and Convenient: By opting for a loan against your ULIP policy, you can access funds quickly and conveniently, without going through the lengthy process of applying for a traditional loan. The loan amount is determined based on the surrender value of your policy, ensuring a smooth and seamless experience.
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No Need to Surrender Policy: Unlike traditional loans where you may be required to surrender your assets, a loan against your ULIP policy allows you to retain ownership of your investment. You can continue to benefit from the potential growth of your ULIP while utilizing the loan amount for your immediate financial needs. You can calculate the maturity value of your ULIP policy by using the SIP calculator available.
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Competitive Interest Rates: Companies offer competitive interest rates on loans against ULIP policies, ensuring that you have access to affordable financing options. This helps you manage your finances effectively while minimizing the burden of repayment.
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Flexibility in Repayment: Individuals have unique financial circumstances. Therefore, companies provide flexible repayment options for the loan against your ULIP policy. You can choose a repayment tenure that suits your needs, making it easier to repay the loan without straining your finances.
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No Prepayment Penalty: If you wish to repay the loan before the completion of the chosen tenure, companies usually do not impose any prepayment penalties. This allows you to clear your debts at your convenience and save on unnecessary interest payments.
Top ULIP Funds†
Fund Name
AUM
NAV
Returns (in %)
3 Year
5 Year
10 Year
High Growth Fund
Max Life
AUM:8,482 Cr
8,482 Cr
NAV
119.99
1.59%
Returns
23.95%
Whole Life Mid Cap Equity Fund
Tata AIA
AUM:13,435 Cr
13,435 Cr
NAV
158.69
2.49%
Returns
21.08%
Virtue II
PNB Metlife
AUM:3,532 Cr
3,532 Cr
NAV
77.53
1.12%
Returns
17.59%
Accelerator Mid-Cap Fund II
Bajaj Allianz
AUM:6,452 Cr
6,452 Cr
NAV
86.49
1.27%
Returns
17.79%
Opportunities Fund
HDFC Standard
AUM:40,966 Cr
40,966 Cr
NAV
78.44
1.16%
Returns
15.75%
Fund Name
AUM
NAV
Returns (in %)
3 Year
5 Year
10 Year
Whole Life Aggressive Growth Fund
Canara HSBC Oriental Bank
AUM:869 Cr
869 Cr
NAV
93.59
0.82%
Returns
16.11%
Whole Life Stable Growth Fund
Canara HSBC Oriental Bank
AUM:266 Cr
266 Cr
NAV
61.92
0.32%
Returns
12.53%
Balanced Fund
Canara HSBC Oriental Bank
AUM:380 Cr
380 Cr
NAV
48.06
0.34%
Returns
11.49%
Asset Allocation Fund II
Canara HSBC Oriental Bank
AUM:341 Cr
341 Cr
NAV
31.32
0.18%
Returns
9.45%
Save N Grow Money Fund
Canara HSBC Oriental Bank
AUM:68 Cr
68 Cr
NAV
58.7
0.37%
Returns
8.69%
Fund Name
AUM
NAV
Returns (in %)
3 Year
5 Year
10 Year
Builder
Canara HSBC Oriental Bank
AUM:243 Cr
243 Cr
NAV
89.55
0.06%
Returns
6.87%
Whole Life Income Fund
Canara HSBC Oriental Bank
AUM:802 Cr
802 Cr
NAV
38.31
0.03%
Returns
6.22%
Debt Fund
Canara HSBC Oriental Bank
AUM:482 Cr
482 Cr
NAV
36.29
0.04%
Returns
5.92%
Conservative Fund
Canara HSBC Oriental Bank
AUM:233 Cr
233 Cr
NAV
55.4
0.09%
Returns
7.01%
Protector
Canara HSBC Oriental Bank
AUM:307 Cr
307 Cr
NAV
64.22
0.06%
Returns
6.07%
Disclaimer :
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
How to Apply for a Loan Against ULIP Policy
Applying for a loan against your ULIP policy is a simple and straightforward process:
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Check Eligibility: Ensure that you meet the eligibility criteria set by the company for availing a loan against your ULIP policy. The criteria typically include factors such as the surrender value of your policy, the tenure of the policy, and any outstanding premiums.
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Loan Amount Evaluation: Based on the surrender value of your ULIP policy, comapnies assess the maximum loan amount you can avail. This amount is generally a percentage of the surrender value, allowing you to retain a portion of your investments.
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Documentation: Complete the necessary documentation, including the loan application form and any supporting documents required by the insurer. These may include your ULIP policy documents, identity proof, address proof, and bank statements.
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Loan Disbursement: Once your application undergoes thorough review and receives approval, the loan amount will be disbursed promptly to your designated bank account. You can then utilize the funds for your intended purposes, whether it's for emergencies, education, home renovation, or any other financial needs.
Wrapping it up!
In conclusion, the Loan Against ULIP Policy offers a viable financial solution for individuals seeking immediate liquidity while maintaining the growth potential of their Unit Linked Insurance Plans (ULIPs). This financial product allows policyholders to leverage the accumulated value of their ULIPs to meet various financial obligations, whether it be for personal or business purposes.
FAQ's
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Can I continue with my ULIP policy while repaying the loan?
Yes, you can continue with your ULIP policy even while repaying the loan. However, the loan amount and interest will be deducted from the surrender value, and the policy's value may be impacted accordingly. -
What happens if I am unable to repay the loan against my ULIP policy?
If you are unable to repay the loan and the interest within the specified period, the insurance company has the right to recover the outstanding amount by deducting it from the surrender value of your ULIP policy. This may reduce the accumulated value of your policy. -
What is the maximum loan amount I can get against my ULIP policy?
The maximum loan amount you can get against your ULIP policy depends on the surrender value of your policy and the terms and conditions set by your insurance company. Generally, you can get a loan amount ranging from 40% to 90% of the surrender value. -
Are there any charges or fees associated with a loan against ULIP policy?
Yes, there are various ULIP charges associated with availing a loan against your ULIP policy. These charges can vary among insurance companies, so it is recommended to review the terms and conditions provided by your insurer. -
Can I claim tax benefits on the interest paid for a loan against ULIP policy?
Tax benefits on the interest paid for a loan against ULIP policy may not be available. ULIPs are subject to specific tax rules, and it is advisable to consult a tax advisor or refer to the latest tax regulations to understand the applicable provisions regarding loan interest and tax benefits.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
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