Explained: How to Cancel Policy After 1 Year

"How to cancel the policy after 1 year?" This is a common question that many people don't have an answer to. The truth is, many people purchase LIC policies online without fully understanding the terms. This causes the policy to be canceled before it matures. Resultantly, it reduces the surrender value - the policy amount refunded after policy cancellation (or surrender). If you are thinking to cancel a LIC policy after one year of buying it, due to any reason, we have an answer for you.  Find out everything about canceling your LIC policy after 1 year in this article.

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How to Cancel Policy After 1 Year?

  • Fill the NEFT and LIC forms respectively. 
  • Submit your original policy documents along with the photocopy of your PAN card. 
  • 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. 

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.

Your Policy Is Surrendered. What Happens Next?

  • 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  • The policy's coverage is no longer applicable.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 pay more for the same benefits if you need to get the same insurance coverage tomorrow. This is because your age has increased, and so has the chances of you being covered.
  • You have broken your agreement with your risk cover and LIC.

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

You can cancel the LIC policy after paying the premiums for a minimum of three years. If you (the policyholder) give up the policy within three years, there will not be any surrender value applicable.

LIC's Rules 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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Written By: PolicyBazaar - Updated: 02 September 2021
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