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:
- 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.
- 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
- 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
- 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.
- 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.