Policy holders are eligible to take loans on their policies subject to certain rules. The policyholder has to apply for a loan in a prescribed form and submit the Policy Bond with the form duly completed. The loan amount is calculated depending on the Surrender Value (SV) that the policy would have acquired, and approximately 85% of the Surrender Value is given as loan.

Rate of interest charged varies from company to company and time to time. A policy holder can repay the loan amount either in part or in full any time during the term of the Policy. If the loan amount is not repaid during the term of the Policy or early claim, the amount of loan plus interest, if any, will be deducted from the claim money and the balance amount will be paid to the claimant.

LIC is currently charging 10.5% interest payable half-yearly on Policy Loans. For LIC, the minimum repayment should be Rs. 50 and thereafter in multiples of Rs. 10. If the interest is not paid regularly every half year, then the interest is calculated on compound interest basis.

If the interest is not paid regularly every half year, then the interest is calculated on compound interest basis.