LIC policy surrender is a major financial decision as it ends insurance coverage and related benefits permanently. It should ideally be considered only after evaluating alternatives like policy loans or partial withdrawals. If LIC policy surrender is unavoidable, ensure all documents are submitted correctly and understand the surrender value to make an informed choice.
Index
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 of LIC policy. Once surrendered, all benefits, coverages, and bonuses under the plan cease immediately. Understanding how to surrender LIC policy is important as the process requires specific forms, documents, and eligibility conditions.
Key Highlights
- The policyholder receives a surrender value after at least 3 years of premium payments.
- Surrender value is calculated using a formula with sum assured, bonuses, and surrender factors.
- 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 coverage stops immediately, and the policyholder gets back a lump sum known as the surrender value.
- The surrender value of LIC policy represents the paid-up value plus accumulated bonuses (if any) after deducting applicable charges.
- Most LIC policies acquire a surrender value only after 3 full years of premium payment.
Types of Surrenders in LIC Policy
Here are some of the common ways of LIC policy surrender:
Full Surrender
This is when the policyholder chooses to completely cancel their ongoing policy.
- 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 in a few exceptional situations where LIC sets specific terms for surrendering the policy.
- The value differs from standard surrender value of LIC policy.
- 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.
- If the policy has got a surrender value, he or she will receive the amount as per the agreed terms.
- If the policy has not got a surrender value, no such pay-outs would occur.
How to Surrender LIC Policy Online Before Maturity?
Here is how to surrender LIC policy online before maturity:
- Navigate to the LIC’s official portal and sign in using your credentials.
- Under the “Customer Services” tab, select “Policy Surrender”.
- Then, download 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 Surrender LIC Policy Offline?
Here is the step-by-step guide on how 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.
Documents Required to Surrender LIC Policy
Here are some of the documents required if the policyholder chooses LIC policy surrender:
- 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
How to Calculate the Surrender Value of LIC Policy?
You can opt for LIC policy surrender only if you fulfil certain criteria such as payment of policy premium consecutively for 3 years. Hence, if you wish for a LIC policy surrender within the initial 2 years, LIC won't provide any incentives.
You can calculate the surrender value of LIC policy 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
- Surrender Value Factor is determined by LIC depending on the policy term and duration.
Example:
If your policy’s Sum Assured is Rs. 5,00,000 and you have paid 6 out of 10 years of premiums, your 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?
Here are the steps to check the 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 such 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.
What Happens after Surrendering an LIC Policy?
After LIC policy surrender, 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
Frequently Asked Questions
Can I surrender my LIC policy online?
Can I close my LIC policy before maturity?
When can I surrender my LIC policy?
How to cancel LIC policy within 15 days?
How to cancel LIC policy after 1 year?
How to check the surrender value of an LIC policy?
How to download the surrender value of your LIC policy?
What is the processing time for surrendering a LIC policy?
How much money will I get if I surrender my LIC policy?
Is it good to surrender an LIC policy after 10 years?
How can I convert my LIC policy to a paid-up policy?
How much time it takes to get money from LIC for surrender?
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