A life insurance policy is an integral part of a complete financial plan as it provides a contingency for the policyholder’s family in case of their unfortunate demise. However, a policyholder might close the policy before its maturity for various reasons. Changing needs, unforeseen circ*mstances or access to a better plan are all valid reasons for surrendering an ongoing policy.
If you have opted for an LIC policy, you can fill up an LIC policy surrender form to cancel it. In the following sections, we will go through the steps of surrendering an LIC plan and everything you need to know before surrendering.
What Does LIC Policy Surrender Mean?
Although you may initially purchase an LIC policy with a specific plan and objective in mind, things might change during an emergency leading to a reconsideration of your priorities. As a result, you might choose to surrender your existing LIC policy or it can be due to some other reasons as well.
In simple terms, surrender of an LIC policy refers to when you choose to withdraw or discontinue your existing LIC policy before its maturity. At the same time all the benefits, coverages and perks no longer remain valid.
In times of emergencies instead of breaking your hard-earned savings, you can consider surrendering your existing policy and liquidating some amount in the form of surrender value. However, there can be a minimum tenure mentioned in the policy within which you cannot surrender; this can vary with different insurers and policies.
Types of Surrenders in LIC Policy
Here are some of the common ways of surrendering a life insurance policy from LIC:
- Full Surrender:
This is when the policyholder chooses to completely cancel their ongoing policy. Hence, the policyholder won't need to pay premiums anymore and won't receive any policy benefits or claims in the future. Depending on the type of policy, LIC will make the pay-out which is typically a certain percentage of premiums paid, after the deduction of applicable surrender charges.
- Special Surrender:
It is applicable, especially in a few exceptional situations where LIC sets specific terms for surrendering the policy, differing from standard procedures. These situations may involve severe financial difficulties, unexpected events or serious illnesses, where LIC offers reduced charges or a better surrender value.
- Surrender as a Result of No Payment of Premiums:
If a policyholder is unable to pay premiums and renew the life insurance policy within a specified grace period, it will be treated as surrendered. In such a scenario, if the policy has got a surrender value, he or she will receive the amount as per the agreed terms. But if the policy has not got a surrender value, no such pay-outs would occur.
How to Surrender LIC Policy?
Here is the step-by-step guide onhow to surrender LIC policy:
- To start with, visit your nearest LIC branch and obtain Form 5074, also known as the Surrender Discharge Voucher.
- Upon completion, the form along with the necessary documents must be submitted.
- Following submission, LIC will process your policy surrender request.
- Upon approval, the surrender value will be transferred to your bank account.
- Alternatively, instead of visiting a branch, you can opt to courier the discharge voucher and other necessary documents to LIC's head office in Mumbai.
How to Surrender LIC Policy Online Before Maturity?
Here ishow to surrender your LIC policy online before maturity:
- Navigate to the LIC’s official portal and sign in using your credentials.
- Then, simplydownload the Surrender Discharge Voucher (LIC Form No. 5074).
- Fill it up carefully and submit the same along with the necessary documents to LIC.
- Once the form is accepted, the surrender process will start.
- The surrender value will be deposited into your registered bank account.
How to Calculate the Surrender Value of LIC Policy?
You can surrender your LIC policy only after you fulfil certain criteria such as payment of policy premium consecutively for 3 years. Hence, if you choose to surrender your policy within the initial 2 years, LIC won't provide any incentives.
You can calculate the surrender value of your LIC policy by using the formula given below:
{Basic sum assured + (number of premiums paid/total number of premiums payable) + total bonus received} * X
Please note that X is the factor of surrender value.
How to Check LIC Policy Surrender Status Online?
Wonderinghow to check the surrender value of your LIC policy? Here are the steps guiding you to check LIC policy surrender status online:
- Navigate to the official LIC website.
- Log in to your account using your credentials. If you are a new user, click on ‘register’.
- Then from the left side of the homepage, select ‘Enrol Policies’.
- Click on 'Click to Enrol New Policies' and then on 'Proceed.'
- Enter the necessary details like the policy number, the policyholder's name and the premium amount. Then simply click on the 'Enrol your policy' option.
- Under the 'Loan and Bonus' column, select 'Click for details' next to your policy.
- Here, you can find information about your loan eligibility and surrender value.
LIC Policy Surrender Procedure
Here are the steps guiding you on how to surrender your LIC policy online before maturity:
- Contact your LIC agent through whom you have availed the LIC policy or visit a nearby LIC branch. Inform them that you want to surrender your existing LIC policy and they will provide you the required forms and guide you through the process.
- Carefully fill in the form for the surrender request and make sure that all the details you fill in are accurate.
- Keep all the necessary documents handy such as the Form 5074 (LIC surrender form), original policy bond, bank account number, identity proof in original, cancelled cheque along with an application stating why you want to surrender.
- Submit the above-mentioned documents to the concerned branch official or if you have opted through an LIC agent, you can submit the mentioned documents to him/her. Moreover, you can even upload the mentioned documents to the LIC's online portal.
- Post submission, you will receive an acknowledgement receipt confirming your policy surrender application.
- Nowyour policy surrender request will be verified; usually, it takes a couple of weeks for the process to get completed.
Documents Required to Surrender LIC Policy
Here are some of the documents required if the policyholder chooses to surrender his/her LIC policy:
- Policy surrender application form
- Form 5074: surrender discharge voucher
- Cancelled cheque for providing policyholder's bank account details
- Original policy bond
- NEFT mandate form
- PAN Card copy
What Happens After Surrendering an LIC Policy?
When you cancel an LIC policy, here are the following things that will happen:
- Your coverage ends right away.
- You get the surrender value.
- The policy becomes void and can't be restarted later.
- You lose all the benefits that come with the policy.
- You won't get any tax benefits under Section 80C anymore.
Related Article:
LIC Policy List Plans and Tax Benefits
LIC Online Payment
How To Check LIC Policy Status
Taxability of Life Insurance Policy
LIC Child Plans
LIC Plans for Girl Child
