How to surrender an LIC Policy and why you should ?
There are times when we make important decisions in such a rush that we don’t know its features or benefits. One of such benefits is buying of LIC policies. When such decisions are made in a rush, we feel that it is useless and wish to get rid of such policies.
Well, that brings me directly to the point of the article ‘How to Surrender LIC Policy?’ However, before diving into that, I’ll like to brief you about what’s the meaning of surrendering a LIC policy.
To put this in simpler words, it means to exit from a life insurance policy before its maturity where policyholder gets a certain amount known as Surrender Value.
Difference between surrender and Paid up of Life Insurance
|Policy Paid up||Policy Surrendered|
|Stop Premium payment immediately||YES||YES|
|Receive of Lump sum immediately||No||YES|
|Insurance cover till maturity period||Yes - with Reduced sum assured||NO|
|At maturity or death of life assured||Total Paid up value||Nothing will be Payable|
|Eligible for Future Bonus or Guaranteed Additions||NO||NO|
Usually, the bonus is not included in the surrender value. However, if it’s a participating policy, the bonus gets included according to the prevalent rules. One thing which the policyholders must keep in mind is that the policy must have completed three years.
What must be clear in policyholder’s mind is that this process cannot be done online, and this procedure can be carried out at your serving branch only. (Serving branch – from where you’ve bought the policies). The sole reason behind all this is your serving branch has all the documents right from proposal forms to loan details.
There are a few documents which you will be required to have while surrendering the policy :
Once you’ve submitted the required documents, your bank account will be credited with a certain amount of fund within 5-10 days.
Before you make any rushed decisions AGAIN, you must know the implications of what you’ll be doing.
A few of them are –
- Surrendering your policy will mean losing your risk cover. You will be paid only 30% of the premiums, which will exclude premium for the first year and any bonuses.
- If you wish to rebuy the same policy, you will have to pay more premiums for the same benefits at the end of the day.
- You will no longer receive any tax benefits under Sec. 80C of IT Act if the policy is terminated/ceased to be in force within two years.
- These are a few benefits which the policyholders let go of when they decide to terminate their policy. What the policymaker needs to do is make a sound decision and make sure that this is not a rushed decision.
- Think of the repercussions before you make any move and of course, the innumerable benefits you will be losing.
Either way it is YOUR choice.
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