Every Insurance Company Should Provide Loans Against Life Insurance Policies - IRDAI


Rohit Kulkarni

Rohit Kulkarni

Jun 17, 2024


New directives have been issued by the Insurance Regulatory and Development Authority of India (IRDAI) directing insurance companies to offer policy loans on all life insurance savings products, effective from September 30, 2024.

Every Insurance Company Should Provide Loans Against Life Insurance Policies - IRDAI

IRDAI’s Directive on Policy Loans and Customer Protection in Life Insurance Products

With the aim to assist policyholders in meeting their liquidity needs by allowing loans based on surrender values of their policies, this mandate works in the direction to assist the policyholders.

As per the latest master circular for life insurers by IRDAI, all non-linked savings products that provide surrender value must include a policy loan option. 

In addition to this, insurers have the discretion to extend this loan facility to their annuity products with a ‘Return of Purchase Price’ feature, based on eligible surrender values.

The circular specifies that the Unit Linked Insurance Products (ULIPS) are excluded from the loan provision.

In order to enhance the customer protection, IRDAI stipulates that the insurers should comply with the decisions that have been made by the Insurance Ombudsman within 30 days of receipt, failing to comply with which shall result into a penalty of Rs 5,000 per day payable to the complainant.

Enhanced Benefits and Flexibility in Pension Products

Another move from IRDAI that is particularly beneficial to policyholders is the fact that now the authority has allowed partial withdrawals from pension products after three years from the policy commencement date during the deferment period. 

This allows withdrawals up to 25% of the total premiums paid, which would in turn allow the policyholders to address various financial needs such as education expenses, housing, medical treatments, and other critical expenses. 

It is to the three times during the policy tenure that the withdrawal option is limited.

What also underscores the IRDAI’s commitment to policyholder interests and aims to foster an environment conducive to innovation and enhanced customer satisfaction in the insurance sector is this circular!

In order to better suit as well as cater to the consumer financial planning needs, it allows insurers flexibility in designing products with varied premium payment and policy terms.


Rohit Kulkarni
Rohit Kulkarni
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