The LIC, Life Insurance Corporation of India offers a wide range of life insurance plans ranging from term plans to savings and investment plans. These plans come with a variety of tenures so that an insurance seeker can select a type of coverage as per his/her requirements. Additionally, the policy runs with a chosen term for providing term insurance coverage.Read more
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However, what if the life assured wants to withdraw or close LIC plans before the chosen term comes to an end? Can LIC withdrawal online is possible? The closing of the LIC policy is possible i.e. called surrendering. Here we will understand the surrendering of LIC policies and how it can be done smoothly:
Surrendering a LIC plan means withdrawing up or giving up the policy before the tenure of the policy is over. The life assured can choose to surrender the policy anytime that he/she wants to. In case of surrendering the policy, the company is required to pay the surrender value, and the life coverage is ended.
Policyholders sometimes think of surrendering their LIC policies when they are not satisfied with the terms and conditions, or features and benefits of the availed policy. A life assured is only able to surrender his/her LIC policy after having paid the premium for about 3 years. LIC provides a certain amount of money to the policyholder while withdrawing the policy online. This specific amount of money is surrender value. Though this option of surrendering LIC policy is not considered to be a suitable one as surrender value is considerably lower than the premiums paid.
As we have discussed above, that there is a minimum period i.e., of three years after which LIC policy can be surrendered. The minimum period is computed from the date the policy is purchased, and it also depends on the policy's tenure and the premium payment term (PPT). There are different instances on which minimum period is determined:
Generally, it is not suggested to surrender the policy offered by LIC but in case of need, one can only surrender the policy after 3 years. This simply means that you need to hold a plan till a required period i.e., a 3-year timeframe before surrendering it. After surrendering the LIC policy, the insurance company will offer you a certain amount of money called an accumulated bonus along with the premiums amounts paid for that particular time.
As stated above, once a policy is surrendered, the surrender value is paid to the policyholder. The surrender value of LIC is determined to be higher than the special surrender value or Guaranteed surrender value. What are these values? Let’s understand them in detail:
Surrender value that is generated using the following formula:
GSV = [Total premium paid X GSV Factor] + [Accrued Bonus X GSV Factor]
Always check the policy bond documents before purchasing the LIC policy as it is eligible for surrender value or not. This value is payable after the completion of three years. It is generally 30 percent of the paid premiums excluding the 1st premium amount and the premium paid for riders, taxes, and any type of bonus received from the insurer.
The surrender value % depends on the policy term and year of the policy in which it is withdrawn.
This is the value that is computed by the insurer depending on its performance. If the insurance company is making profits in the last few financial years, then the surrender value will be higher than the guaranteed surrender value. Like GSV, the SSV factor also increases with time.
If the life assured has paid his/her premiums on time for >3 years but <4 years, then 80 percent of the complete maturity amount is provided to the policyholder by LIC. If in case the policyholder has paid his/her premium for >4 years but <5 years, then 90 percent of the maturity amount is provided to the life assured. In addition to this, if he/she pays a premium for >5 years, then the policyholder receives 100 percent of the maturity amount.
For a smooth surrendering of LIC policy, follow the below steps:
If you choose to surrender the LIC policy, you can lose a lot of benefits provided by the insurer under the scheme. It is not recommended to surrender the policy but if the need arises, the minimum period for LIC withdrawal online is of three years. Therefore, holding the current policies and continuation of all plans without allowing them to lapse is one of the best criteria for continuing the policy. It is always advisable to read the terms and conditions, features and benefits before purchasing any policy.
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