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LIC policies are among the most favoured investment tools for people in India. LIC offers a diverse range of policies for people with different requirements. Despite the availability of easy information, people often get stuck with policies that are not suitable for them. If you feel that an LIC policy is not satisfactory, you can discontinue the coverage by surrendering it back to the company.
Through this way, it is possible to get back most of the money invested in various maturity plans. Since term insurance is pure insurance coverage without any maturity benefits, getting back the premium amount may not be possible here. If you are looking for how to proceed with surrendering your policy, this article is just for you. Before we look at the process involved in surrendering an LIC policy, let’s check out the guidelines put forth by LIC regarding the surrender of a policy.
If you have decided to surrender your policy, you need to consider the following guidelines issued by LIC:
When discussing the different types of surrender benefits, it is also important to know the conditions associated with a paid-up policy. A paid-up policy is one in which the premiums have been paid for at least 3 consecutive years and the subsequent premiums are missed. The reason for non-payment of premiums could be anything including general financial hardship. If the premiums are missed, the policy will lapse and it will hence be treated as a paid-up policy. The formula for calculating the paid-up value of a policy is as follows:
Paid-up value = [No. of premiums paid * Sum assured amount]/Total number of premiums
For instance, let us assume that a policy has a term of 10 years and sum assured amount of Rs.10 lakh. If premiums are paid for a total of 4 years, then the paid-up value of the policy is Rs.4 lakh.
If the policy is not surrendered, this paid-up value will be paid to you in case of maturity or death of the policyholder during the policy term. In this case, the coverage (till the paid-up value of the policy) will continue till the date of maturity or the death of the policyholder.
When it comes to discontinuing a policy, there is a lot of difference between surrender value and paid-up value. This can be listed as follows:
Once you have decided to surrender your policy, you may approach the home branch of LIC (the one where you purchased the policy) and provide an application for surrendering it. The surrender form can be downloaded from the company’s official website. This form must be filled up and submitted to the company by visiting the branch directly. Along with the surrender form, the following list of documents must be submitted:
Once all the necessary documents are submitted to the company, they will process the request and the surrender value will be transferred to the bank account within a maximum of 10 days.
Surrendering an LIC policy must be done only after thinking about the potential consequences arising out of it. Once you surrender a policy, the contract between you and the company gets terminated. The insurance protection you have with your policy will be lost once you surrender it. Also, the money you get back from from surrendering a policy is a lot less than what you might have paid as premiums. Hence, it is necessary to consider the financial implications fully before going ahead with the surrender. If you are in need of urgent money and surrendering is the only option, you may go ahead with the process by following the procedure given above.
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