How to Cancel Policy After 1 Year?

How to Cancel LIC Policy After 1 Year?

Here's what you need to do to cancel your LIC policy after 1 year:

• Step 1: Fill the NEFT and LIC forms. 

• Step 2: Submit your original policy documents along with a photocopy of your PAN card. 

• Step 3: Write a handwritten letter to LIC stating why you wish to discontinue this policy. Attach all the documents and send them through registered post or courier. 

The refund amount applicable will be paid once your application is processed. Before proceeding with the cancellation process, it's essential to understand the LIC terms and conditions and the specific terms and conditions of life insurance policy. These guidelines outline the eligibility criteria, refund rules, and required documentation when discontinuing a policy.  

What Documents Would You Need?

• Details of your linked Bank Account. 

• The original policy bond document.

• Your identity proof like PAN Card, Aadhar Card, Voter ID, or Driving license.

• LIC Policy Surrender Form No.5074

• NEFT Form (In case you don't have the Surrender Form)

When Can You Surrender the Policy?

Generally, there is a certain tenure after which you can surrender your LIC policy. The policy's purchase date determines this tenure. There can be different minimum periods for various situations. These are:

1. Single-Premium Schemes

   Under this type of plan, you can surrender your policy from the second year of your policy. You cannot do it in the first year.

2. Regular & Limited Premium Schemes

   The policy term matters here. If it is less than ten years, you can surrender your LIC policy after two years. However, you must wait till the third year to surrender the policy for a tenure longer than ten years.

What Happens After LIC Policy Cancellation?

• You cannot re-activate your policy in the future. 

• The policy's coverage is no longer applicable. 

• You will get a low refund amount (surrender value) compared to all the premiums paid till the surrender date.

• You will no longer enjoy the policy benefits. 

• You will have to pay more for the same benefits if you need to get the same insurance coverage in the future. It happens because your increased age makes you a higher-risk customer.

Why Is It not Ideal To Cancel The Policy After 1 Year?

According to the terms and conditions of life insurance policy documents, if you cancel your LIC policy just after 1 year, the following will happen:

• No Surrender Value: As LIC terms and conditions clearly state, a surrender value is only generated after two consecutive full years of premium payments. If you cancel within the first year, no refunds are paid.

• Loss of Initial Investment: Since the surrender value doesn't apply, the money you paid as your first premium is effectively lost.

• Missed Policy Benefits: Cancelling early stops the accumulation of any kind of bonus or money-back, and any future financial protection the policy could offer is lost.

LIC Terms and Conditions About Policy Surrender

If you are sure that you want to cancel the LIC policy, here is what you need to know:

• You will not get any of the premium amounts paid in the first year in your surrender value.

• In general, the surrender value is returned to the policyholder at 30% of the premium amount. The actual surrender value may vary according to the policy term and the number of premiums you have paid.

• When calculating surrender value for a policy, LIC will not include any bonuses, rider premiums, or tax benefits.

Wrapping It Up

There can be situations where you may need to cancel the LIC policy after one year. In that case, you should not expect any refund (surrender value) to be paid.  We hope we have answered your question, "How to cancel the policy after one year."

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