Insurance Policies as Security 🛡️

Banks lend against Life Insurance Policies (e.g., LIC Endowment Policy).

Note: General Insurance (Car/Fire/Health) CANNOT be used as security (they have no savings value).

Concept: Surrender Value 💰

• Face Value: Amount payable on death/maturity (e.g., ₹5 Lakhs).
• Surrender Value: Amount insurance company pays if you stop policy TODAY.
• Loan Amount: Bank lends margin on Surrender Value (Not Face Value!).
  • Usually 85-90% of Surrender Value.

Process: Assignment 📝

1. Assignment: Borrower transfers rights of policy to Bank.
2. Registration: Assignment registered with Insurance Company.
3. Effect:
   • If borrower dies, Bank gets the claim money first.
   • Bank adjusts loan, returns balance to nominee.

Advantages ✅

1. High Safety: LIC/Insurance companies are regulated.
2. Liquidity: Easy to surrender and recover money.
3. Increasing Value: Surrender value increases with every premium paid.

Quiz Time! 🎯

💡 Final Wisdom: "Your life insurance protects your family. Assigned to a bank, it protects your loan!" 🛡️🤝

Next up: Loans Against Collateral Securities - Primary vs Collateral! 🔗