LIC Policy Surrender: Rules, Process, and Benefits


Many people take out LIC policies, pay premiums for a few years, and then stop paying. When this happens, the policies will lapse.

However, you can surrender the policies if you find it difficult to continue paying the premium, giving you a sense of control over your financial decisions.

Specific rules apply to surrendering policies. The company will refund the remaining amount, excluding some of your paid premium.

If you stop the policy before it matures, you are surrendering it. The surrender value of an LIC policy is much less than the maturity benefits.

LIC Single Premium Plan policies can be surrendered in the second year. Limited regular premium plans with ten years or fewer policies can be surrendered after two years. Policies with a tenure of more than ten years can be surrendered after three years.

To surrender a policy, you need to prepare the following documents, which can be submitted to your LIC agent or LIC office:

  1. Original policy bond documents
  2. Request for surrender
  3. Surrender Form
  4. LIC NEFT Form
  5. Bank account details
  6. Original ID proof like an Aadhaar Card, PAN Card, or Driving License
  7. Canceled cheque
  8. Letter to LIC explaining the reason for surrendering the policy

The Insurance Regulatory and Development Authority of India (IRDAI) has introduced new rules on the surrender value of life policies, effective October 1.

Every life insurance policy must provide an exact surrender value. The regulator also states that the policy should not lapse if the next premium is unpaid.

Under the new rules, policyholders will receive significantly higher returns after paying the premium for just one year. This is a positive change, as policy surrender or cancellation was not applicable for the first two years.

The surrender value was paid nominally and unilaterally from the third year onwards. However, keeping policyholders in mind, IRDAI has introduced new regulations that ensure a fairer surrender value, providing you with a sense of security.

If the policy is terminated (lapses) due to non-payment of premium after one year, you can receive up to 80-85% of the premium paid.

For example, if you pay a monthly premium of Rs. 10,000 (Rs. 1,20,000 per annum), you can receive a little over a lakh as the surrender value. The new rules have brought specific valuation into force for surrender.

Under the new rules, the policyholder is entitled to a higher portion of the premium if they surrender the policy after the first year.

For instance, if your policy’s monthly premium is Rs. 20,000, you can receive 80-85% of the premium paid after a year. The new rules also allow surrender under the old rules and provide an opportunity to switch to a new insurer.

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