How to surrender LIC policy?
Prematurely closing lic policy- When someone is closing LIC policy before completing the term / before maturity. Surrender is possible only if the policy has acquired paid up value. It is called the surrender of LIC policy.
Cancellation- It is the word used for closing the LIC policy within 15 days of taking the LIC policy. So if the policyholder does not agree with the terms and conditions of the LIC policy then within 15 days he has the right to cancel the LIC policy. This is also called the Free Look Period.
- The policyholder can return the policy stating the reasons for his objection.
- The policyholder will get the premium that he has paid for that policy.
- LIC will deduct, the proportionate risk premium for the period you were covered and the expenses incurred from the premium.
Lock-in period –Different policies have different locking periods. You can not close the policy before completing the locking period. In traditional plans like Jeevan Labh, Jeevan Lakshya or Jeevan Umang kind of plans, the locking period is just of 2 years. Whereas locking in the period of ULIPS is 5 years.
How surrender value is calculated?
For traditional plans: {No. of premium paid/Total number of premiums to be paid + total bonus received } * Surrender Factor. The actual surrender value can be calculated from the branch only.
For Ulips –After the locking period, ULIPS can be surrendered partially or fully. The process is simple, one can get partial amount by cancelling the partial surrender amount by cancelling partial number of units. or to get the full amount, one can close the policy fully. There are no surrender charges in ULIPS after the locking period.
Check list of documents for LIC Policy surrender?
Implications of surrender of LIC Policy?
Surrendering a Life Insurance Corporation (LIC) policy in India or any life insurance policy generally has several implications, and it’s important to understand these consequences before making a decision:
Financial Loss: Surrendering a policy before its maturity can result in a financial loss. The surrender value you receive may be significantly lower than the total premiums paid, especially if you surrender the policy early in its term. This is because life insurance policies often have high initial expenses and fees.
Loss of Insurance Coverage: When you surrender your LIC policy, you lose the life insurance coverage provided by that policy. This means your beneficiaries will no longer receive a death benefit if something were to happen to you.
Lost Investment Opportunity: Some life insurance policies, like endowment or unit-linked insurance plans (ULIPs), also offer investment components. Surrendering such policies means you miss out on the potential returns from these investments
Conclusion:
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.
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