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Five things you need to know about insurance policy loans

A policy loan also referred to as a life insurance loan is a loan that one takes against their life insurance policy. It is one of the sources from which you can get a loan the easiest. This is because a policy loan is taken against one’s own assets thereby making the usual pre-credit hurdles such as credit checks with Credit Reference Bureaus and income verification for check-off loans unnecessary. A policy loan is a great way to ensure you have some cash as you walk the journey of securing your financial future.

Here are a few quick tips you need to know about policy loans:

  1. Value of the loan: One is allowed to borrow a loan amount that is arrived at after looking at the surrender value of their policy at the time of loan application. A surrender value is the amount the client would be paid if they were to end the insurance contract, normally attained after 3 years of premium payment. For this reason, one must have paid premiums for not less than 3 years to qualify for the loan.
  2. Policies that qualify for a policy loan: The loan is available to policies that accumulate cash and so have a payout (also called maturity value) at the end of the pre-agreed duration (term) such as Education plans and endowment polices. This means that term polices such which have no cash value cannot give you access to credit
  3. Cost of loan: A policy loan is very affordable. The loan is given to you tax-free, without a credit life deduction and at an interest rate that is lower than commercial loans at a reducing balance
  4. Use of funds: There is no restriction as to what should use the funds for. You can channel them to any immediate need for which you have borrowed.
  5. Repayment: The repayment period ranges from company to another but must be before the policy matures.

If you are a Geminia Life Insurance client and are interested in taking up a policy loan for those rainy days or you’re not, but looking to take a plan in order to enjoy this facility in future please click HERE to request a call back.