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Updated on Oct 11, 2023
Wondering how to surrender LIC policy online? The procedure is easier than it looks initially. There are sometimes many reasons behind surrendering an LIC policy and if that is the case for you, then here is some help at hand.
LIC policy surrender means opting out of your LIC policy before its maturity. The amount received in one such situation is the LIC policy surrender value. Once you undergo your LIC policy surrender, you would not be able to revive it in the future. However, before you surrender your LIC policy, you need to be aware of the fact that you will not get the original benefits which are much higher as compared to the surrender value.
Also Read: Step by Step Process to Check LIC Policy Status Without Registration
The terms and conditions of all LIC policies vary. Therefore, before you decide to buy one, you must go through them very carefully. The period of policy surrender depends much on the premium paying terms and time of purchase of the policy. To surrender a LIC policy, the usual situations are mentioned herein below:
Under a limited period and regular plan, each policy will have its own terms and conditions. However, in most cases,
If the tenure of the policy is 10 years or less, the duration of surrendering the policy is 2 years
If the tenure of the policy is more than 10 years, the duration of the surrender of the policy is 3 years.
Under a single premium plan, you can surrender a policy only in the second year of buying it.
The Surrender value of LIC policy is determined by the surrender processing time of the LIC plan. Guaranteed Surrender Value and Special Surrender Value are the two types of surrender values available under LIC:
The guaranteed surrender value allows the policyholder to surrender their plan only when it completes 3 years duration. So, the policyholder is supposed to pay the premium for at least 3 years after policy purchase. When the policyholder surrenders the plan after 3 years, the value received is 30% of the total paid premiums, which excludes premiums paid in the first year as well as the premiums paid towards riders like accidental benefit riders etc. Hence, the later the policy is surrendered, the greater the value you would receive as surrender amount.
The Special surrender value is normally higher than the guaranteed surrender value. The below is the way in which the special surrender value of LIC works:
Though policyholders can surrender an LIC policy, they can also apply for an alternative. They can stop paying premiums for their plan and keep the plan active rather than surrendering the plan. This is possible in the case of paid-up policy, where the sum assured is less. Here, the coverage on life continues till the end of the term of the policy.
Paid-up value is similar to surrender value in many ways. The table below will help in giving you a clarity between the two:
Features | Paid – Up Value | Surrender Value |
Lump-sum pay | Paid at the end of policy duration | Paid immediately to the policyholder |
Policy maturity/Death of insured | Offers total paid up value | No compensation provided |
Extra Bonus | NA | NA |
Premium pay | Stopped immediately | Stopped immediately |
LIC (Life Insurance Corporation) of India is one of the most trusted investment avenues for Indian citizens. The company offers various kinds of insurance and investment plans for its customers. Why do then people search for how to cancel LIC policy or how to surrender LIC policy?
Is it then possible to cancel or surrender your LIC policy before the date of maturity or conclusion of the tenure? The answer is naturally Yes.
The documents that you have to submit while surrendering a LIC policy are:
Also Read: LIC vs. Private Insurance Companies in India
Surrender Value = {The Basic Sum Assured x (The Number of Premiums Paid/The Total Number of Premiums Payable) + The Total Bonus received} x-Factor of Surrender Value
Also Read: What Are the Late Payment Charges for LIC Premium?
Here are some things to know if you were wondering how to close your LIC policy online:
Also Read: How to check the Surrender Value of LIC Policies?
There are quite many reasons to not surrender your LIC policy. Some of them are here.
In case you are reconsidering surrendering your LIC policy, you can actually go for an alternative idea. You can stop paying premiums for your LIC policy; however, your life cover will be continued. While you do that, your policy will become a paid-up policy. Nevertheless, the sum assured, which is also called paid-up value, decreases under a paid-up policy. Even if you do not pay the premiums, the life cover will go until the policy term is over. If the policyholder passes away during the policy tenure or on the maturity of the LIC policy, the paid-up value is offered to the nominee/policyholder.
If you buy a LIC policy and realize that the policy doesn’t suit your needs, you have the option to cancel it. However, you must get the cancellations done within 15 days of the free look period. That means, you just have 15 days to rethink your LIC policy and cancel it if you don’t want to continue it. Ideally, LIC doesn’t recommend the cancellation of its insurance plans, however, if a customer wants to leave a plan for another one, they can do so at their will within the first 15 days of buying the policy.
So, if you are not satisfied with your policy, get it canceled within 15 days of buying the plan. This duration of 15 days is called a free-look period.
Here are a few guidelines by LIC to keep note of by people who want to cancel their LIC policies once the free-look period is over:
Once you surrender your LIC policy, the insurance coverage will no longer exist and you will get the surrender value credited to your account. Also, the same policy cannot be restarted or revived. All the benefits will also cease to exist. The surrender value you get is considerably lower than the premiums paid by you. Hence, surrender your policy after thinking things through and only after taking proper financial advice.
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LIC policy can be surrendered online from the 3rd year of the policy onwards. However, the minimum duration of the policy should be 3 years and in case of longer tenures it can be 10 years and beyond.
If a policyholder surrenders his/her LIC policy before maturity date, the life cover immediately comes to a halt and the insured won't be able to revive it in the future.
A LIC policy can be surrendered after being in force for 3 years. Here, the surrender value received is equal to 30% of the total premiums paid excluding the paid premiums of the first year.
The surrender value of LIC policy can be calculated using the below formula:
[Basic sum assured (Number of premiums paid/Total number of premiums payable) + Total bonus received] x Surrender Value Factor.
Your policy will continue; however, the benefits you get will be reduced.
You will get a 100% special surrender value. However, this will only happen if you have paid the premiums regularly.
You will get a certain grace period within which you can make the premium payment. On crossing the grace period, the policy will get lapsed.
It is certainly not a great idea to surrender your LIC policy. You can rather choose not to pay the premiums anymore, which let the policy be.
PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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