LIC Surrender Value After 4 Years

Life Insurance is a long-term assurance and there are some unfortunate and critical times when you might have to surrender the policy. In other words, this simply means the policy terminates before its maturity period. Thus, if you want to surrender your policy in the mid-tenure, you would receive a surrender value of the allocation of income and savings.

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Moreover, the surrender charge also gets deducts from the sum, which varies from one policy to another. A minimum period is required to surrender the policy under LIC plans. So is it possible to receive the LIC surrender value after 4 years? Let's find out:

What is a Surrender Value?

Surrender value is the sum that life assured receives from the insurance company when he/she decides to terminate the availed policy before the maturity time. The primary reason to surrender the policy is the dissatisfaction with the features, benefits, and terms and conditions. A policyholder will only be able to surrender his/her policy after paying premiums for 3 years. On surrendering the policy, a certain amount of money is provided to the life assured by LIC. This sum of money is called the Surrender Value. Though as per the various researchers, surrendering of policies is not recommended because LIC Surrender value after 4 years is uniformly low.

What Are The Effects of Surrendering LIC policy?

There are some of the ways with which an insurance holder gets affected if he/she decides to surrender the policy. Here is a quick laydown:

  • As the contract between the insurance company and the policyholder is canceled in these cases, so the life coverage constituent doesn’t exist after the surrendering of the policy. Consequently, any benefits that were offered previously will be ceased.
  • You can get several tax benefits for a life insurance policy U/S 80C of the Income Tax Act, 1961. These tax benefits will also be revoked as the contract that exists between the insurer and the insured is closed.

Types of LIC Surrender Value After 4 years

Generally, there are two types of surrender values available in such cases:

  1. Special Surrender Value

    If the premiums have been paid diligently for 3 years but less than 4 years by the policyholder, then 80 percent of the complete sum assured amount (maturity benefit) is provided by LIC to the life assured. If in case, the insurance holder has paid premiums for more than 4 years and less than 5 years, then 90% of the complete maturity sum is provided. If the policyholder is paying premiums for more than 5 years, then he/she receives 100% of the sum assured (maturity amount).

  2. Guaranteed Surrender Value

    As it is stated above the policyholder is eligible to surrender the LIC policy after the completion of 3 years, providing the policy should also be in force for at least 3 years. The LIC surrender value is 30 percent of the paid premium amount. In this, the premium paid in 1st year of the policy and the premium paid towards term rider and accident benefits is not included.

Documents Required for Policy Surrender

The policyholder is required to submit the following documents at the time of surrendering the policy:

  • The original copy of the policy bond
  • Form No. 5074 i.e., LIC policy Surrender form
  • Canceled cheque from the policyholder’s registered bank
  • ID proofs such as Aadhar Card, PAN Card
  • Fill LIC NEFT Form, if form 5074 is not being used.

Drawbacks of Surrendering LIC policy

  • One of the main reasons to invest in life insurance is to protect the financial future of the policyholder’s family. This reason is crushed when the life assured surrenders the policy because at that time, the life cover is not available and he/she cannot avail of any of the benefits offered by the LIC.
  • If in case an insurance holder wishes to invest in the same policy after few years, then he/she is required to pay an additional premium amount. This is because the age of an individual is increased and the risk of death is also getting increased.
  • Based on the T & Cs of the LIC policy, the accrued bonus will be provided to the policyholder. However, surrendering policy results in a cessation of all the benefits and consequently, he/she will only receive a limited part of the money paid by him in the last few years.
  • LIC Surrender Value after 4 years is immediately canceled if the policyholder wants to surrender his/her policy before the completion of 3 years.

What is a Paid Up Value?

Any type of policy that has lapsed within the 3 years of buying it and for which premiums have been paid for about 3 years is called a paid-up policy. It is a reduced SA (Sum Assured) amount that was available at the time of buying the policy.

Paid-Up Value Vs Surrender Value 

Surrender Value After 4 years 

Paid-Up Policy 

The lump-sum amount is available instantly to the policyholder

In this, the policyholder does not receive the lump sum payment instantly

No compensation will be provided in case of maturity of the policy or the death of the life assured

Complete Paid Up value is provided in case of maturity of the policy or the death of the life assured

The policyholder is not eligible for any additional future bonus

The policyholder is not eligible for any additional future bonus

How to Calculate LIC Surrender Value After 4 years?

LIC Surrender value can be computed using a Surrender value calculator that helps you get the approximate figures of your Surrendered policy. You can calculate your LIC Surrender value immediately by providing some basic information about your policy.

Wrapping It Up!

It is generally not recommended to surrender the LIC policy, but if the need arises, one has to keep in mind that the minimum period to surrender the policy is 3 years. This simply means that a policyholder is required to hold his/her policy for a minimum period of 3 years, before surrendering it. Upon the surrendering of the policy, the company will provide you the accrued bonus along with the premium paid for that time.

Written By: PolicyBazaar - Updated: 20 September 2021
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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