Borrowing against your State Life policy: how much, what it costs, how to apply

In short

• State Life currently lends up to 80% of the surrender value, on policies where the premium due is fully paid up.
• State Life's FAQ quotes 10% a year and its Manage Your Policy page 12.5%, both compounded half-yearly. Confirm the rate when you apply.
• The policy stays in force and your family stays covered.
• You can repay in part or in full at any time. Anything still owed is deducted from the final payment.

How much you can borrow

State Life lends up to **80% of the surrender value** of the policy, where the premium due is fully paid up. Note what that is a percentage of: not the sum assured, and not the total of the premiums you have paid, but the policy's current cash value.

That distinction matters most in the early years, when the surrender value is still small. A policy with a large sum assured but only three years behind it may support a modest loan. The longer the policy has run, the larger the cash value and the more it will lend against.

If you do not know your policy's current surrender value, ask the zonal office or ask us; it is the number that decides everything else here. See what a surrender value is and when it exists.

What it costs

State Life publishes two rates. Its FAQ says **10% a year, compounded half-yearly**; its Manage Your Policy page says **12.5% a year, compounded half-yearly**. Interest is payable half-yearly either way. Ask the zonal office for the rate that applies on the day you apply, and get it in writing.

Compounded half-yearly means that interest left unpaid is added to the balance twice a year, and the next period's interest is charged on the larger amount. A loan you leave untouched for several years grows faster than a flat 10% a year would suggest. If you can service the interest as it falls due, do.

The cover does not stop

This is the whole point of a policy loan, and the reason it usually beats a surrender. The policy stays in force, the bonuses keep accruing, and if the worst happens while the loan is outstanding, your family is still covered — State Life simply recovers what is owed from the amount it pays.

A surrender, by contrast, ends the cover the day it is processed, and you cannot buy the same policy back at the same age and the same price.

How to apply

• Apply on State Life's prescribed loan form at the zonal office that services your policy.
• Submit the policy document with the completed form. If it is lost, you will need a duplicate first.
• Give the bank account the money should be credited to.
• Keep the premiums paid. The loan is granted where the premium due is fully paid up, and a lapsed policy is a different conversation.

Repaying it, or not

You can repay a policy loan in part or in full at any time during the term of the policy. There is no fixed schedule you must meet.

If it is never repaid, State Life is entitled to recover the loan and the markup on it from the final payment — the maturity amount or the death claim. Nothing is written off; it is netted off. A family expecting the full sum assured can be caught out by a loan nobody told them about, so tell your nominee if you take one.

The automatic premium loan, which is not the same thing

State Life also has an **Automatic Premium Loan**, one of the two automatic non-forfeiture options. If you miss a premium and the policy's net surrender value covers it, State Life can lend the policy the premium itself to keep it in force, rather than letting it lapse.

That is a safety net, not a plan. It runs down the policy's value, the return on it is set by State Life from time to time, and once the net surrender value no longer covers the unpaid premium the policy is kept going only for a proportional broken period before it is forfeited. See reviving a lapsed State Life policy.

Key terms

Policy loan

Money borrowed against the policy's surrender value, with the policy left in force.

Compounded half-yearly

Unpaid interest is added to the balance twice a year, and the next period's interest is charged on the larger amount.

Automatic Premium Loan

A non-forfeiture option where State Life lends the policy its own unpaid premium to stop it lapsing.

Questions people ask

How much can I borrow against my State Life policy?

Up to 80% of its surrender value, on policies where the premium due is fully paid up. The surrender value is the policy's current cash value, not the sum assured.

What interest does State Life charge on a policy loan?

State Life's FAQ says 10% a year and its Manage Your Policy page says 12.5% a year, both compounded half-yearly, with interest payable half-yearly. Confirm the current rate with your zonal office before you borrow.

Does my family still get the sum assured if I die with a loan outstanding?

The cover continues, and State Life recovers the outstanding loan and markup from the amount it pays. Your family receives the balance, so tell your nominee about any loan.

Is there a deadline to repay?

No. You can repay in part or in full at any time during the policy term. Anything unpaid is deducted from the final payment.

Can I take a loan on a lapsed policy?

Loans are granted where the premium due is fully paid up. A lapsed policy needs to be revived first.

Sources

• State Life, Frequently Asked Questions (policy loans, non-forfeiture options)
• State Life, Manage your policy (policy loan)