Do banks accept insurance policies as collateral?
Shailesh Rawat, Dehradun
Insurance policies that have an element of saving in them, such as endowment plans apart from pure insurance cover, can be used as collateral for loans. Banks will examine the features of the policy before accepting it as collateral. The surrender value of the policy will be taken as the basic value and after allowing for a margin, the rest of the value of the policy will be used as collateral. The loan will not be based on the insured value of the policy because the bank would not know if you are likely to pay your premiums regularly. Loans are not made against the insured value of the policy.
