Surrendering LIC Policy Before Maturity Time: Your Guide!

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This leads to the return of policy before its maturity, thereby resulting in substantially low surrender value.

What Is Surrender Of LIC Policy?

When you opt-out of a policy before its maturity, then it is called surrendering of the policy and the amount that you receive at the time, is LIC policy surrender value. Normally, with a regular policy, the LIC policy surrender value can be calculated only after the policyholder has paid the premiums continuously for 3 years. However, surrender of policy is not recommended since the LIC surrender value will always be subsequently low. Also in the case of surrender before 3 years, no surrender value is offered.

How Is LIC Surrender Value Calculated?

The surrender value of the policy, only after 3 successful years of premium payments, can be calculated as:

{Basic sum assured X (number of premium paid/ total number of premium payable) plus total bonus received}, X, the factor of surrender value.

Payment In Case Of Surrender

Surrender value is determined by LIC policy surrender processing time. There are 2 types of surrenders available. Let’s check them out:

Guaranteed Surrender Value (GSV)

Under the guaranteed surrender value, the policyholder can surrender their policy only after the completion of 3 years which means that the premium has to be paid for a minimum period of 3 years. If you surrender after 3 years, the surrender value will be around 30% of the premiums paid, excluding the premium paid in the first year and the premiums paid towards accidental benefit. So, the later the policy surrendered, the higher will be the LIC surrender value.

Special Surrender Value

(Original sum assured *(number of premiums paid/ number of premium payable) + total bonus received) * surrender value factor.

When you stop paying premiums after a certain period, the policy continues but the sum assured decreases. This sum assured is called paid-up value.

  • Paid-up value is the original sum assured. (Number of premiums paid/number of premiums payable)

Surrender Value

If you terminate your LIC policy before time, surrender value is to be paid to the policyholder. Surrender value is usually more than Guaranteed Surrender Value and Special Surrender Value.

As we can see that paid-up value and surrender value sounds quite similar. So, here is a table that will help you get a clarity between these two:


Paid-up Value

Surrender Value

Lump-sum Payment

It is not received immediately

Immediately given to the policyholder

Maturity of the policy or Life assured's death

Total paid-up value is provided

No compensation is offered

Extra future bonus



Premium payments

Immediately stopped

Immediately stopped

When Can You Surrender The LIC Policy

Every LIC policy has its own terms and conditions and the policyholder is advised to read them carefully before buying the policy. The period of surrendering any policy varies from one another, depending on their time of purchase and the premium paying terms. The usual minimum period to surrender LIC policy in normal scenario is as follows:

Under Single Premium Plan

Under this plan, policy can be surrendered in the second year of purchase. Surrender of policy can never be made in the first year of policy purchase.

Under Limited Period And Regular Premium Plan

Under this plan, usually the terms and conditions vary of different policies. But in general,

  • If the policy is of 10 years or less, the policy surrender duration is 2 years
  • If the policy is of more than 10 years, the minimum duration is 3 years.

How To Surrender LIC Policy

All the LIC policies can be surrendered after 3 years’ policy premiums have been paid. Even though you can surrender your policy, it is advisable to all the policyholders not to surrender their policies. Still, if you surrender, make sure that:

Documents Required For Policy Surrender

  • Original policy bond documents
  • Request for surrender value payment
  • LIC Surrender form- form 5074
  • LIC NEFT form
  • Bank account details
  • Original ID proof like Aadhar card, pan card or driving license
  • A cancelled cheque
  • Hand-written letter to LIC stating the reason to discontinue


Hence, to conclude, by surrendering the LIC policy, the customer loses out on a lot of benefits of the scheme. If surrendered before a definite period, the amount of premium is much higher than the value received. Therefore retention of existing policies and continuation of all policies without allowing them to lapse is the best strategy for continuing life insurance protection.

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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