I want to take a loan against my policy which will mature in another five years. How is the loan amount decided? What will happen if I am not able to repay the loan amount before the policy matures? Will the policy period be extended or put on hold?The loan amount against a life insurance policy is calculated on the basis of the surrender value (SV) of the policy at the time of taking the loan. The loan amount is generally around 85 per cent of the SV. The interest rate charged varies from company to company and time to time. A policyholder 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 in case of an early claim, the amount of loan plus interest, if any, is deducted from the claim money and the balance is paid to the claimant. The policy period is neither extended, nor put on hold on account of settlement of the loan amount.
