Unit Linked Insurance Plans (ULIPs) offer a unique combination of insurance and investment, making them a popular choice among investors. One lesser-known feature of ULIPs is the ability to secure a loan against the policy. Let’s look at the possibility of obtaining a loan against a ULIP policy in India, along with the associated benefits.
What is a ULIP?
A Unit Linked Insurance Plan is a financial product providing both insurance coverage and investment opportunities. The premium paid by the policyholder is split between life insurance and investment in various fund options, such as equity, debt, or balanced funds. The dual advantage of protection and wealth creation is one of the key ULIP benefits.
Loan Against ULIP Policy
Policyholders can avail of loans against their ULIP policy under certain conditions. Here’s what you need to know:
Eligibility Criteria:
The policy must have completed a specific tenure, usually three years, to be eligible for a loan. Furthermore, the policy should have acquired a surrender value.
Loan Amount:
The loan amount is generally a percentage of the surrender value of the ULIP plan. This percentage can vary between insurers but typically ranges from 50% to 80%.
Interest Rates:
They are generally lower than personal loans, making loans against a ULIP policy an attractive option for policyholders.
Benefits of Taking a Loan Against ULIP
Taking a loan against your ULIP plan can offer several advantages:
Lower Interest Rates:
Compared to unsecured loans, the interest rates on ULIP-backed loans are more favourable.
No Impact on Investment:
The investment portion of the ULIP continues to grow, providing continued ULIP benefits.
Flexibility:
Loans can be repaid at the policyholder’s convenience, subject to the terms set by the insurer.
Considerations Before Taking a Loan
While taking a loan against a ULIP plan has its benefits, there are some considerations to keep in mind:
Impact on Sum Assured:
In case of the policyholder's demise, the outstanding loan amount may be deducted from the sum assured.
Repayment Terms:
Understand the repayment terms to avoid any penalties or additional charges.
Securing a loan against a ULIP in India is a viable option for policyholders needing funds while maintaining their investment. It offers lower interest rates and does not impact the growth of the invested funds. However, it is essential to understand the terms and conditions and consider the potential impact on the sum assured.
Disclaimers:
Unit Linked Insurance Products are different from the traditional insurance products and are subject to risk factors. The Premium paid in unit-linked life insurance policies are subject to investment risks associated with capital markets and 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. IndiaFirst Life Insurance Company Limited is only name of the Insurance Company and _________________ (UIN__________) is only the name of the Unit Linked Life Insurance contract and 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 issued by the Insurance Company. 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. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale.
IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North [C] Wing, Tower 4, Nesco IT Park, Nesco Center, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 1800 209 8700. Email Id:customer.first@indiafirstlife.com, Website :www.indiafirstlife.com, Fax No. +91226570600. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd. under license. Adv. Ref. No.:_________.
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