LIC policy provides insurance coverage and savings for financial emergencies.
Life Insurance Corporation of India (LIC) is a trusted investment option that provides the dual benefits of life insurance coverage and savings. In case of a financial emergency, the savings accumulated through LIC policies can come in handy. However, if the need for funds is urgent, policyholders can opt for policy surrender to access their funds.
Policyholders must keep in mind that policy surrender can only be done after a minimum of three years of premium payments. Surrendering the policy before maturity can result in significant financial losses as the surrender value of the policy decreases.
The surrender value is the amount equivalent to the policy's value that the policyholder receives upon surrendering the policy or withdrawing money from LIC. If the policy is regular, the surrender value is calculated based on the premiums paid for the first three years. If the policy is surrendered before three years, there is no surrender value.
Policyholders who have paid the premium for the policy for at least three years are entitled to the surrender value. In the case of policies surrendered before three years, policyholders are only entitled to 30 per cent of the premium paid, excluding the premium paid for the previous year. This means that the premium paid in the first year is considered as zero.
Policyholders who wish to surrender their LIC policy must provide certain documents, including the bond document of the LIC policy, request for payment of surrender value, LIC surrender form (Form 5074), LIC NEFT form, bank account details, original ID proof like Aadhaar card, PAN card or driving license, a canceled bank check, and the reason for the policy's closure must be given in writing.
Investing in LIC policies can provide a reliable source of savings and life insurance coverage. However, policyholders must be aware of the rules and regulations related to policy surrender to avoid financial losses.
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