EMIs of loan against life policies cannot be paid through credit cards: IRDAI

IRDAI has asked life insurance companies not to accept repayment of loan taken against life insurance policies through credit cards.

IRDAI said, “The authority has decided to stop the facility of re-payment of loans taken against the insurance policy using credit card as a mode of payment. Accordingly, all life insurers are advised to stop the acceptance of credit card as a mode of re-payment of loans granted against insurance policies with immediate effect.”

Currently, life insurance companies offer loan against traditional policies like money back, endowment and whole life. Policyholders usually get 90% of the surrender value of their traditional policies on loan. Life insurers do not offer loans on term policies and ULIPs.

Many policyholders avail this loan due to low interest rates, which ranges around 8-9% per annum; however, if they use credit card for repayment and do not repay it to the card company within the due date, such an instalment becomes burdensome for them defeating the purpose of the regulator.