LIC Policy Surrender: How to Surrender LIC Policy & Check Status

LIC policy surrender means discontinuing the policy before its maturity and claiming the surrender value. Once surrendered, all benefits, coverages, and bonuses under the plan cease immediately. Understanding how to surrender a LIC policy is important as the process requires specific forms, documents, and eligibility conditions.

Key Highlights

• Eligibility: The policyholder receives the surrender value after at least 3 years of premium payments.
• Calculation: Surrender value is calculated using a formula that takes into account the sum assured, bonuses, and surrender factors.
• Process: Policies can be surrendered offline at an LIC branch or online via the LIC portal.
• Required documents: Include Form 5074, original policy bond, ID proof, PAN, and bank details.

What is LIC Policy Surrender?

LIC policy surrender is the voluntary termination of a life insurance policy before maturity. The policyholder receives the surrender value in a lump sum, and coverage ends immediately.

• The surrender value of an LIC policy represents the paid-up value plus accumulated bonuses (if any) after deducting applicable charges.
• For regular premium LIC policies with a term of more than 10 years, the guaranteed surrender value is available after paying premiums for 3 full years.
• For policies with a term of 10 years or less, it starts after 2 years of premium payments.

Types of Surrenders in LIC Policy

Here are some of the common ways of LIC policy surrender:

I. Full Surrender

This is when the policyholder chooses to completely cancel their ongoing policy.

• Premiums stop, and future benefits or claims end.
• Depending on the type of policy, LIC will make the payout, typically a certain percentage of premiums paid, after applicable surrender charges are deducted.

II. Special Surrender

It applies in a few exceptional situations in which LIC sets specific terms for policy surrender.

• The value differs from the standard surrender value of the LIC policy.
• These situations may involve severe financial difficulties, unexpected events, or serious illnesses, in which case LIC offers reduced charges or a better surrender value.

III. Surrender as a Result of No Payment of Premiums

If a policyholder is unable to pay premiums and renew the life insurance policy within the specified grace period, the policy will be considered surrendered.

• If the policy has a surrender value, he or she will receive the amount as per the agreed terms.
• If the policy does not have a surrender value, no such payouts would occur.

How to Surrender LIC Policy Online Before Maturity?

The forms can be downloaded online through the customer portal, but LIC does not allow complete policy cancellation online. The final surrender is completed offline after the original policy document must be submitted for verification.

To begin the process, follow these steps:

Step 1: Navigate to the LIC’s official portal and sign in using the user’s credentials.

Step 2: Under the “Customer Services” tab, select “Policy Surrender”.

Step 3: Then, download the Surrender Discharge Voucher (LIC Form No. 5074).

Step 4: Fill it in carefully and submit it, along with the necessary documents, to LIC.

Step 5: Once the form is accepted, the surrender process will start.

Step 6: The surrender value will be deposited into the registered bank account.

How to Surrender LIC Policy Offline?

Here is the step-by-step guide on how to surrender a LIC policy:

Step 1: To start with, visit the LIC branch where the policy was registered and obtain Form 5074, also known as the Surrender Discharge Voucher.

Step 2: Upon completion, the form and the necessary documents must be submitted.

Step 3: Following submission, LIC will process the policy surrender request.

Step 4: Upon approval, the surrender value will be transferred to the bank account.

Submit requests and original policy documents only at the servicing branch, not the head office.

Documents Required to Surrender LIC Policy

Here are some of the documents required if the policyholder chooses the LIC policy surrender:

• Form 5074 (Surrender Discharge Voucher)
• Cancelled cheque for providing the policyholder's bank account details
• Original policy bond
• NEFT mandate form
• PAN Card copy

How to Calculate the Surrender Value of LIC Policy?

As per IRDAI rules, if the applicant surrenders their policy early after paying premiums for at least 1 year, they may still receive some money back through the Special Surrender Value (SSV). For policies with a term of more than 10 years, the Guaranteed Surrender Value usually begins after 3 years of premium payments.

Calculation of  the surrender value of the LIC policy can be done by using the formula given below:

Surrender Value = (Paid-up Value + Vested Bonus) × Surrender Value Factor

Paid-up Value = (Number of premiums paid ÷ Total premiums payable) × Basic Sum Assured

The Surrender Value Factor is determined by LIC based on the policy term and duration.

Example:

If the policy’s Sum Assured is Rs. 5,00,000 and the policyholder has paid 6 out of 10 years of premiums, the paid-up value will be:

(6 ÷ 10) × Rs. 5,00,000 = Rs. 3,00,000

If vested bonuses are Rs. 30,000, and the surrender factor is 30%,

Surrender Value = (Rs. 3,30,000 × 30%) = Rs. 99,000

How to Check LIC Policy Surrender Status Online?

The “Loan and Bonus” does not show the current status of a surrender request; it shows only estimated details for active policies. It. To view the latest status, contact the home branch. To add the policy and view basic details online, follow these steps:

Step 1: Navigate to the official LIC website.

Step 2: Log in to the user’s account using the credentials. If the applicant is a new user, they click on ‘register’.

Step 3: Then, from the left side of the homepage, select ‘Enrol Policies’.

Step 4: Click on 'Click to Enrol New Policies' and then on ‘Proceed.’

Step 5: Enter the necessary details such as the policy number, the policyholder's name and the premium amount. Then simply click on the 'Enrol your policy' option.

Step 6: Under the 'Loan and Bonus' column, select 'Click for details' next to ‘your policy’ to find information about the loan eligibility and surrender value.

What Happens after Surrendering an LIC Policy?

Once the LIC policy is surrendered, the following things will happen:

• The coverage ends right away.
• The policyholder receives the surrender value.
• The policy becomes void and cannot be restarted later.
• The applicant will lose all the benefits that come with the policy.
• The applicant won't be eligible for any tax benefits under Section 80C anymore.

LIC policy surrender is a major financial decision, as it permanently ends life insurance coverage and related benefits. It should ideally be considered only after evaluating alternatives like policy loans or partial withdrawals. If the LIC policy surrender is unavoidable, ensure all documents are submitted correctly and understand the surrender value to make an informed choice.

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