How to Cancel LIC Policy After One Year – Check Its Process & Documents

There are many policyholders who apply for policy cancellation just after a year of purchasing the plan. Why is it so? People generally buy insurance without understanding the terms of the policy. So when they realize the limitations of their policy, they want to terminate the plan to avail a better policy. However, is it so easy to cancel a policy? If so, what is the process to get a policy cancelled? In this post, we will dig into the LIC policy cancellation process.

If you are planning to cancel your LIC policy after a year of purchase, we have covered everything that you should know about policy cancellation in this post. Let’s start with how to cancel an LIC policy after one year.

What is the Process to Cancel a Policy after 1 year of Purchase?

Here are the steps on how to close an LIC policy after 1 year of purchase:

• Write an application to LIC requesting the insurer to cancel your policy
• Attach all required documents and share with the insurer via online or offline way like registered post/courier or email
• Fill out the respective LIC forms for policy cancellation as well as the NEFT form
• Along with it, submit a copy of your LIC policy document (original) and PAN card
• The insurer will refund the applicable amount after the required deductions
• You will also receive a copy of the policy cancellation letter from the insurer

What Documents are Required to Cancel a Policy after 1 year?

Below are the documents required to cancel a policy after 1 year:

• Bank account details (the account that is linked to your policy)
• Original document of policy
• ID proof of insured individual such as Aadhar Card, Voter ID, PAN Card, or Driving license
• Form No.5074 for LIC Policy Surrender
• NEFT Form (If the Surrender Form is not available)

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Under What situation can you surrender the LIC Policy?

In general, LIC policies can be surrendered after a particular tenure, which is determined by the date of purchase of the policy. Depending on the situation as mentioned below the minimum period of policy surrender differs: 

1. Single-Premium Schemes:

Under the single premium scheme, the insured can surrender the policy from its second year.

2. Regular & Limited Premium Schemes:

Under the regular and limited policy schemes, what matters is the term of the policy. For example, if the policy term is below ten years, you can surrender the plan after two years. In the case of policies with tenure beyond 10 years, the policyholder has to wait for three years of policy completion to surrender the plan.

What happens once you surrender a policy?

Here are some points that need consideration once your LIC policy surrender application is processed:

• You must remember that once you surrender your policy, you cannot activate it again in the future
• The coverage offered under the policy will not be available any longer
• You will not receive a better refund/surrender amount as compared to what you have paid as premiums so far
• No policy benefits will be available for you any longer
• In case you wish to buy a similar coverage in the future, you will have to pay more to receive the same advantages. This is because with age, the chances of getting covered become thin and costly
• Further, this will also break your risk cover agreement with the insurer

Why you should not consider Cancelling your LIC policy after 1 year?

If you are planning to cancel your LIC policy, do it after ensuring that the policy completes a tenure of three years and that you have paid premiums for all three years. However, if the insured cancels the policy or surrenders it within the first three years of your policy term, you will not receive any surrender value for the plan.

Policy Surrender Rules of LIC

You need to understand some rules about cancelling a LIC policy. If you have made up your mind about cancelling your LIC plan, here is what you should know:

• Cancelling your LIC policy in the first year or after completing 1 year will not get you any surrender value or the premium amounts that you have already paid
• Usually, as per the rule, the surrender amount that is returned to the policyholder is 30% of the premium amount. However, the actual amount returned might vary as per the policy term and number of paid premiums
• Further, note that while calculating a policy surrender amount, LIC doesn’t include bonuses, tax benefits, and rider premiums, etc.

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To Sum Up

In some extreme situations, people might have to cancel a LIC policy after it completes one year. If that is your case, you should not expect to receive any surrender value or refund. If you are willing to get a refund, waiting until the policy completes the 3-year tenure to surrender the plan and get a good refund value is better.

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