LIC Surrender Value After 4 Years

What is LIC Surrender Value?

When considering surrendering an LIC policy, it's crucial to check the Surrender Value. This value is the amount the policyholder receives upon terminating the policy before maturity due to dissatisfaction with its features, benefits, or terms and conditions. Generally, policyholders can surrender their LIC policy after paying premiums for 3 years. 

Types of LIC Surrender Value After 4 years

Generally, there are two types of surrender values available in such cases:

• Special Surrender Value
  If the premiums have been paid regularly for 3 years but less than 4 years by the policyholder, then 80 percent of the complete sum assured amount (maturity benefit) is provided by LIC to the life assured. If, in case, the insurance holder has paid premiums for more than 4 years and less than 5 years, then 90% of the complete maturity sum is provided. If the policyholder pays premiums for more than 5 years, they receive 100% of the sum assured (maturity amount).

• Guaranteed Surrender Value
  As stated above, the policyholder can surrender the LIC policy after 3 years, provided the policy has been in force for at least 3 years. The LIC surrender value is 30% of the paid premium amount. In this, the premium paid in the first year of the policy and the premium paid towards term rider and accident benefits are not included.

Factors to Consider Before Surrendering LIC Policy

• Loss of Life Cover: Surrendering a LIC policy means losing the life cover provided. This leaves the policyholder's family financially at risk in case of the policyholder's death, which defeats the purpose of securing their future.

• Increased Premiums in case of Reinvestment: If you decide to get another policy later, you might have to pay more because you'll be older and considered at higher risk.

• Loss of Accrued Bonuses: LIC policies often accumulate bonuses over time, which enhance the policy's value. Surrendering the policy before maturity usually results in losing these accrued bonuses, reducing the overall payout significantly.

• Penalties for Early Surrender: LIC policies often have a minimum lock-in period, typically three years. Surrendering the policy before this period can result in the forfeiture of any surrender value accrued up to that point, meaning the policyholder receives nothing.

• Tax Implications: Surrendering an LIC policy may have tax implications, notably if the surrender value received exceeds the premiums paid. This could lead to unexpected tax liabilities for the policyholder.

• No Surrender Value in Term Plans: LIC term insurance plans typically do not provide a surrender value. However, an Unexpired Risk Premium Value may be applicable in certain situations. This depends on factors such as the type of premium payment—whether it is Regular, Single, or Limited—and the current status of the policy, whether active or lapsed.

How To Surrender the LIC Policy After 4 Years?

One needs to follow the steps below to surrender their LIC Policy:

Step 1: Visit your nearest LIC branch or log in to LIC’s official website.

Step 2: Download or obtain the "Surrender Discharge Voucher" (LIC Form No. 5074) from LIC.

Step 3: Complete the form to terminate the policy and withdraw the surrender value.

Step 4: Submit the filled form to LIC along with the required documents.

Step 5: Once LIC approves the form, the surrender process begins. The surrender value will be transferred to your registered bank account within 7-10 days.

Documents Required for Policy Surrender

The policyholder is required to submit the following documents at the time of surrendering the policy:

• The original copy of the policy bond

• Form No. 5074, i.e., LIC policy Surrender form

• Canceled cheque from the policyholder’s registered bank

• ID proofs such as Aadhar Card, PAN Card

• Fill LIC NEFT Form if form 5074 is not being used.

How to Calculate LIC Surrender Value After 4 Years?

LIC Surrender value can be computed using a Surrender value calculator that helps you get the approximate figures of your Surrendered policy. You can calculate your LIC Surrender value immediately by providing basic information about your policy. 

Surrendering LIC Policy Vs Reduced paid-up option: Which is better?

The reduced paid-up option in life insurance allows policyholders to convert their existing policy into a paid-up policy with a reduced death benefit, using the accumulated cash value to cover premiums. This maintains some level of life insurance coverage without further premium payments. On the other hand, surrendering a life insurance policy involves terminating it in exchange for the current cash value, ceasing all future benefits and coverage. 

The decision between these options depends on whether one prefers to retain some coverage (via reduced paid-up) or access cash immediately (via surrender).

Wrapping It Up!

Surrendering an LIC policy should be carefully considered due to potential financial implications such as loss of accumulated bonuses and reduced life cover. While the surrender value after four years is generally low, it may not compensate for the premiums paid. Exploring options like the reduced paid-up policy could provide a balance between maintaining coverage and accessing some financial benefits. Always evaluate personal circumstances and future needs before making a decision.

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