A policy loan is a loan offered by an insurance company at the going interest rate on the capital markets. A redeemable life insurance or accident insurance policy held by the borrower serves as the loan collateral.

The standard system provides the statuses offer and contract for granting policy loans. The functions available for policy loans are very similar to those for mortgage loans. As for mortgage loans, transaction management offers functions for entering the main information relating to policy loans including the related terms and conditions. You can also maintain master data on the business partners and collateral involved in policy loans. You record the underlying insurance policy for the loan in the collateral master data.

You can also enter master data relating to business partners and other collateral (for more information, see Master data).

When you maintain master data, customer accounts are automatically created in R/3 Financial Accounting. Each customer account belongs to exactly one partner/address relationship and the open items of the related loan are managed on this customer account. In addition to the bank details specified in partner management for loans, you can also define master data related to payment transactions in the customer account.