LIC Premature Withdrawal After 5 Years: Everything You Need to Know

If you find yourself in this position after five years, it’s crucial to understand the implications and process involved.

Understanding LIC Premature Withdrawal

Premature withdrawal refers to terminating your life insurance policy before its maturity date. For instance, if your LIC policy is set to mature after 20 years and you decide to withdraw it after just 5 years, this constitutes a premature withdrawal. While it may be necessary sometimes, it’s important to consider the consequences.

How to Withdraw Your LIC Policy After 5 Years

If you've decided to withdraw your LIC policy, follow these steps:

• Visit the LIC Branch: Go to the local LIC branch where you purchased your policy. You can approach the new branch for assistance if you've switched branches.

• Complete the Withdrawal Form: You can download the policy withdrawal form from the LIC website or obtain it at the branch. Fill it out accurately.

• Submit Required Documents: Along with the withdrawal form, you’ll need to provide several documents:

  • NEFT form and bank details

  • Original policy document

  • Cancelled cheque

  • Proof of age (like Aadhar or PAN card)

  • Identity proof

  • Proof of address

• Wait for the Processing: The underwriting department will review the documents once you submit them. If everything is in order, your surrender amount will typically be transferred to your account within 10 days.

Eligibility Criteria

To be eligible for withdrawal, you must have paid premiums consistently for at least three years. Therefore, if you consider withdrawing after five years, you meet this requirement.

Implications of LIC Policy Withdrawal After 5 Years

Withdrawing your policy comes with significant consequences:

• Loss of Coverage: By withdrawing, you terminate your insurance contract, which means you lose your life coverage.

• Surrender Value: You will typically receive only 30% of the premiums paid (excluding the first year's premiums, bonuses, and additional rider premiums).

• Higher Future Premiums: If you decide to purchase a similar policy in the future, you will likely face higher premiums due to increased age and associated risks.

• Paid-Up Policy: If premiums have been paid for more than three years but you stop payments, your policy may become a paid-up policy, resulting in reduced coverage.

What Are The Disadvantages of Premature Withdrawal

• Increased Premiums for New Policies: If you buy a new policy after withdrawing, you’ll face higher premiums due to age and potential health changes.

• Loss of Tax Benefits: Surrendering your policy means losing tax benefits under Section 80C of the Income Tax Act, which can impact your overall financial planning.

Summing It Up

While withdrawing your LIC policy after five years may seem necessary due to unforeseen circumstances, it’s essential to consider the implications thoroughly. You will lose the coverage and significant benefits associated with your policy. If you must proceed, ensure you understand the process and have all necessary documents ready to avoid delays.

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