What Do You need to Know About LIC Withdrawal After 5 Years?

Read on to understand everything you need to know about LIC terms and conditions of withdrawal after 5 years.

Are You Eligible to Withdraw Your LIC Policy?

As stated above, it is generally not recommended to surrender or withdraw a LIC policy, but should the need arise, it is important to keep in mind the criteria for eligibility for this will be three years. This means you need to pay the premiums of your LIC policy constantly for its initial three years before surrendering or withdrawing. In your case (if you are looking to withdraw your LIC policy after 5 years), you are eligible to withdraw the policy. 

After you've surrendered the LIC coverage, the insurance company will give you the amount referred to as ‘surrender value’ that may contain 'accumulated bonus' along with the premiums you paid for the period after deducting some charges. As per LIC terms and conditions, a surrendered policy will not be provided with any future bonuses declared by LIC on the specific policy. To know the exact surrender value of your policy, you can use the LIC surrender value calculator available on the official LIC portal or reliable third-party websites.

How to Do LIC Withdrawal After 5 Years?

If 5 years have passed after you purchased your LIC policy, you are eligible for policy withdrawal. However, keep in mind that currently, the facility of surrendering LIC policy is not available online. So, it would be best if you surrendered the LIC policy through the service branch of LIC. 

Ideally, this would be the place from where you have bought your LIC policy. Additionally, suppose you have switched branches, and it is the new branch. In that case, that LIC branch will be the service center that you can use to surrender your policy. The reason to approach a service branch for policy surrender is that all your policy documents, including proposals forms, loan information, and other information will be accessible at the service branch only. 

Remember that you need to personally visit the branch to request to surrender your LIC policy if it's over 5 years.

How to Check Your Specific Surrender Value ?

Step 1: Log in to the LIC portal
Step 2: Find the section with policy details
Step 3: The current surrender value of your policy should be displayed there
Step 4: Use an online surrender value calculator from the LIC or other reputable portals.

Documents Required for LIC Withdrawal After 5 Years

LIC terms and conditions state that failing to submit the exact documents needed to withdraw your LIC policy after 5 years can either extend the process or lead to the termination of your application.  

Here is the list of important documents you would need to proceed with the application:

• A canceled cheque

• Original copy of the policy contract

• Identity proof such as PAN card or Aadhar card

• Form number 5074 

• LIC NEFT form (if Form 5074 is not available)

Note that LIC terms and conditions surrounding the surrender value based on factors like experience, economic environment, etc.

Implications of LIC Policy Withdrawal After 5 Years

If you have decided to withdraw your LIC policy after 5 years, you need to be aware of the below-mentioned implications:

• The contract between the insurer and insured is voided, the life-insurance element will cease to exist once the policyholder has surrendered their policy. Thus any benefits before available will no longer be valid.

• The policyholder can leverage numerous tax benefits for the life insurance policy under section 80C of the IT Act. These benefits can also be removed if the surrender represents closing the current contract. 

• The surrender value you receive may be lower than expected, especially if the policy has not completed a significant portion of its term. This can lead to financial loss compared to staying invested.

• Once surrendered, the policy cannot be revived. Even if you change your mind later, you must purchase a new policy, likely at a higher premium due to increased age or health changes.

• Any bonuses accrued under participating policies will be forfeited or partially paid, depending on the policy type and terms. This reduces the overall payout from what could have been received at maturity.

Disadvantages of Withdrawing LIC Policy

Withdrawing your LIC policy after 5 years comes with a couple of demerits, as listed below:

• Suppose the policyholder wishes to buy that same LIC policy within a couple of years. In that case, he/she will have to pay a higher premium. This is because the policyholder's age has increased, and consequently, the risk.

• Based on what is stated in terms of the LIC agreement, the accumulated bonus can be redeemed. Since the surrender of a policy is similar to breaking a contract, the policy owner will only receive a certain amount of the money he/she paid in premiums.

• LIC terms and conditions state that once a policy is surrendered, the life coverage ends immediately. The policyholder and their family will no longer have any financial protection in case of an unexpected event.

• Surrendering the policy may result in a lower surrender value than expected, especially if it’s a traditional plan. This means you may receive less than the total premiums paid, resulting in a financial loss.

• Withdrawing the policy early can impact your long-term financial planning. LIC policies are designed for long-term wealth creation and protection, so exiting early can disturb your investment and savings goals.

What are the Important Considerations Before Surrendering an LIC Policy?

• You will lose the life insurance protection

• You will also lose potential maturity benefits and any future bonuses

• Buying a similar policy again in the future will cost you more because of increased age and risk.

Wrapping Up

LIC policy withdrawal is a complex process. You need to know various things like documents required, eligibility, implications, and the disadvantages of withdrawing your LIC policy after 5 years or before maturity. We have covered all these points in detail in this article. Make sure you understand all the aspects of withdrawing the policy and the LIC terms and conditions, assess your financial situation (think twice), and then make an informed decision that is in the best interests of you and your dependents.

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