How to Surrender Your LIC Policy Guide

Life insurance policies from the Life Insurance Corporation of India (LIC) help families feel safe. They provide money if something happens to the person insured and also build savings over time. But life can bring surprises—maybe money gets tight, you find a better way to save, or you just don’t need the policy anymore. That’s when many people think about surrendering their LIC policy. Surrendering simply means stopping the policy early, before it reaches its full maturity date, and getting back a lump-sum amount called the surrender value.

Once you surrender, the life cover ends right away. You stop paying premiums, and you lose all future benefits like bonuses, riders for extra protection, or any maturity payout. It’s a big step, so understanding every detail helps you avoid regrets. In this guide, we explain everything in simple words: what surrender means, the different types, who can do it and when (including new rules from 2024), how to calculate what you’ll get, step-by-step processes for online and offline surrender, required papers, how to track your request, what happens next, tax points, better options instead of surrendering, pros and cons, tips, and answers to common questions. By the end, you’ll feel confident about your decision.

Key Highlights of LIC Policy Surrender

• You usually need to pay premiums for at least 2–3 full years to get a surrender value, but new IRDAI rules from October 1, 2024, allow special surrender value (SSV) after just one full year’s premium for most non-single-premium policies.
• The surrender value is often around 30% or more of the premiums you paid (excluding the first year’s premium and any rider premiums in older calculations), but it can be higher with special surrender value that includes bonuses.
• You can surrender online through the LIC portal or offline at a branch, but most people end up submitting documents at the branch that issued the policy.
• Important papers include the original policy bond, Form 5074 (Surrender Discharge Voucher), ID proof, PAN card, and bank details.
• After surrender, your policy ends forever—you cannot revive it, and your family loses the life cover.
• Think twice before surrendering, because you might get more money by keeping the policy, taking a loan against it, or converting it to a paid-up policy.

What Exactly Is LIC Policy Surrender?

Imagine you bought an LIC endowment policy ten years ago to save for your child’s education and to protect your family. You paid premiums regularly, and the policy built some cash value through bonuses if it’s a participating plan. Surrendering means you tell LIC you want to end this contract early. In return, LIC gives you the surrender value—a one-time payment that reflects part of the premiums you paid plus any bonuses earned, minus charges and deductions.

This amount is less than what you would get at maturity because LIC needs to cover its costs and risks. The policy stops immediately: no more life cover, no more bonuses, and the contract is closed. Surrender is voluntary—you choose it when you need cash now or when the policy no longer fits your life. Pure term plans usually offer no surrender value because they are pure protection without savings. Unit-linked insurance plans (ULIPs) have their own rules with market-linked funds and higher early surrender charges during the lock-in period (usually 5 years).

Why Do People Choose to Surrender Their LIC Policy?

People surrender for many real-life reasons. Money problems can arise suddenly—job loss, medical bills, or home repairs. Some find other investments that give better returns than traditional LIC policies, which often return 4–6% effectively after inflation. Others realize they have too many policies or the coverage is too low now that their family situation has changed. Young buyers sometimes regret buying without full understanding or feel the premium burden is heavy. In emergencies, the lump sum from surrender provides quick cash. However, LIC itself advises against surrender because the value you get is lower than continuing the policy, and buying new insurance later costs more due to higher age.

Types of Surrenders in LIC Policies

LIC recognizes a few situations for surrender:

Full Surrender

You completely cancel the policy. Premiums stop, coverage ends, and you receive the surrender value (GSV or SSV, whichever is higher). This is the most common type. You walk away with cash but lose all future protection and growth.

Special Surrender

In rare cases like serious illness, big financial hardship, or other exceptional events, LIC may offer better terms—lower charges or a higher payout. You need to explain the situation and provide supporting documents. LIC reviews each case individually.

Surrender Due to Non-Payment of Premiums

If you stop paying premiums after the grace period (usually 30–90 days depending on mode), the policy can lapse. If it has acquired surrender value, LIC pays it out (often after some time). If not, you get nothing, and the policy ends. For policies that qualify, it may automatically become paid-up instead of fully lapsing.

Eligibility: When Can You Surrender an LIC Policy?

Traditionally, LIC required three full years of premiums for surrender value. But IRDAI changed rules effective October 1, 2024: you can now get special surrender value after paying just one full year’s premium for regular or limited premium policies (not single premium).

For Guaranteed Surrender Value (GSV), older rules still influence: policies with term 10 years or less usually need 2 full years; longer terms need 3 years. Single-premium policies have different timelines. ULIPs have a 5-year lock-in. Always check your policy document for exact terms because plans vary (endowment, money-back, whole life, ULIP).

Guaranteed Surrender Value (GSV) vs Special Surrender Value (SSV)

Guaranteed Surrender Value (GSV) is the minimum LIC must pay. It is usually 30% of total premiums paid, excluding the first year’s premium and any extra premiums for riders or accidental benefits. Bonuses may or may not be added depending on the plan.

Special Surrender Value (SSV) is normally higher and more common. It uses this formula: SSV = (Paid-up Sum Assured + Vested Bonuses) × Special Surrender Value Factor

• Paid-up Sum Assured = (Number of premiums paid ÷ Total premiums payable) × Basic Sum Assured
• Vested bonuses are the bonuses declared by LIC up to the surrender date.
• The factor depends on policy duration and plan; it starts low and rises (often reaching 80–90% or more after many years).

LIC pays the higher of GSV or SSV. New 2024 rules make SSV available earlier and potentially more attractive.

How to Calculate the Surrender Value of Your LIC Policy (With Examples)

You can get a rough idea yourself or use the official LIC portal calculator. Basic formula: Surrender Value = (Paid-up Value + Vested Bonus) × Surrender Factor

Example 1 (Traditional Endowment Policy): Sum Assured = ₹5,00,000 Policy term = 20 years Premiums paid = 8 out of 20 Vested bonus = ₹50,000 Surrender factor = 35% (typical after 8 years)

Paid-up Value = (8/20) × ₹5,00,000 = ₹2,00,000 Total = ₹2,00,000 + ₹50,000 = ₹2,50,000 Surrender Value ≈ ₹2,50,000 × 35% = ₹87,500

Example 2 (After New Rules, Shorter Duration): Sum Assured = ₹10,00,000 Premiums paid = 1 full year (annual premium ₹50,000) Assume SSV factor allows ~70% effective return under new norms (varies) Rough SSV could be significantly higher than old GSV of nearly zero.

Example 3 (After 15 Years): Longer duration usually gives higher factors (50–90%), plus more bonuses, so surrender value can approach 70–80% or more of premiums paid in some cases.

Factors that affect the amount: policy type, exact duration, bonuses declared that year, any outstanding loan (deducted), and current IRDAI/LIC rules. Always request an official quote from LIC because actual numbers differ.

Step-by-Step: How to Surrender LIC Policy Online

1. Go to the official LIC India website (licindia.in) and log in to your customer portal using your policy number, date of birth, or registered mobile/email.
2. Navigate to “Customer Services” or “Policy Services” → look for “Surrender” or “Policy Surrender”.
3. Download Form 5074 (Surrender Discharge Voucher).
4. Fill it accurately with policy details, reason for surrender, bank information, and sign it.
5. Attach scanned copies of required documents.
6. Submit the online form; you will get a reference number.
7. Print the form and documents and submit them physically at your home branch (the branch that issued the policy) or send by registered post/courier to the correct address.
8. LIC processes the request after verification.

Fully online surrender is limited; physical submission is usually required for final approval.

Step-by-Step: How to Surrender LIC Policy Offline

1. Visit the home branch that issued your policy (or contact your agent).
2. Ask for Form 5074 or download it beforehand.
3. Fill the form neatly—include policy number, sum assured, your details, bank account, and reason.
4. Attach all original and photocopy documents.
5. Submit everything to the branch officer.
6. They will verify, give you an acknowledgement, and forward for processing.
7. You can also courier documents to LIC’s central office in Mumbai if instructed, but branch submission is safer and faster.

If there is an outstanding loan, it will be deducted from the surrender value.

Documents Required to Surrender an LIC Policy

• Original policy bond (very important—proves ownership)
• Completed Form 5074 (Surrender Discharge Voucher)
• Handwritten or typed letter stating reason for surrender (helps processing)
• Identity proof (Aadhaar, PAN, passport, driving license—original + copy)
• Address proof (if different from ID)
• PAN card copy (mandatory for tax purposes)
• Cancelled cheque or bank passbook copy with account number, IFSC
• NEFT mandate form (filled and signed)
• Any other supporting documents (medical reports for special surrender, death certificate if applicable—no, surrender is by living policyholder)

Keep photocopies of everything you submit and get a written acknowledgement from LIC. Missing documents delay the process by weeks.

How to Check Your LIC Policy Surrender Status Online

1. Log in to the LIC customer portal.
2. Go to “Enrol Policies” or “Policy Details” section.
3. Enrol the policy if not already done by entering policy number, name, and premium details.
4. Under the policy, look for “Loan and Bonus” or “Service Requests” → check status of surrender request.
5. You may also track via the LIC app or by calling the helpline with your reference number.

Status usually shows “Received”, “Under Process”, “Approved”, or “Paid”.

Processing Time and What to Expect After Submission

It typically takes 7–30 working days (a few weeks) for approval and payment, depending on branch workload and document completeness. Once approved, the surrender value is directly transferred to your registered bank account via NEFT. You will receive an SMS or email confirmation. If there is any query, LIC may contact you—respond quickly to avoid delays.

What Happens After You Surrender an LIC Policy?

• Life cover stops immediately.
• You receive the lump-sum surrender value (minus any loan or charges).
• The policy is terminated forever and cannot be revived.
• You lose all accumulated bonuses, future bonuses, and rider benefits.
• No more tax deduction under Section 80C for premiums (but past deductions usually stay unless reassessed).
• Your family no longer has protection from this policy.

Tax Implications of Surrendering an LIC Policy

Surrender value is generally treated as income. If the policy qualifies under Section 10(10D)—sum assured is at least 10 times annual premium for policies issued after certain dates—then maturity or death benefits are tax-free, but surrender may still attract tax on the gain (surrender value minus premiums paid). Consult a tax advisor or CA because rules depend on policy issuance date, premium amount, and your income slab. TDS may apply if the amount is large.

Better Alternatives to Surrendering Your LIC Policy

Surrendering should be the last choice. Consider these options instead:

Convert to Paid-Up Policy

After paying premiums for the minimum period (2 years for policies ≤10 years term, 3 years for longer), stop paying further premiums. The policy becomes paid-up: sum assured reduces proportionally, but life cover continues till maturity (no further bonuses added). At maturity or death, you or your family get the paid-up value. This keeps some protection without premium burden.

Take a Policy Loan

Borrow up to 90% of surrender value (or as per plan) at low interest (around 9–10%). Policy stays active, bonuses continue, and you repay the loan later. Ideal for temporary cash needs.

Partial Withdrawal (for ULIPs or certain plans)

Withdraw part of the fund value without fully surrendering.

Reduce Sum Assured or Premium Mode

Some plans allow lowering coverage or switching to quarterly/half-yearly premiums to make payments easier.

Sell or Assign the Policy

In secondary markets (rare for traditional LIC), but not common.

Review your policy document or talk to your agent before choosing.

Pros and Cons of Surrendering

Pros

• Immediate cash in hand
• Stops future premium outflow
• Ends commitment if policy no longer suits you

Cons

• Much lower amount than maturity value
• Loss of life cover when you may still need it
• Opportunity cost—money could grow more if kept
• Possible tax on gains
• Harder and costlier to buy new insurance later

Tips to Make the Best Decision

• Use the LIC surrender value calculator on their portal for an estimate first.
• Compare surrender value vs paid-up value vs projected maturity value.
• Talk to your LIC agent or a financial advisor—get numbers in writing.
• Check for any outstanding loans or riders.
• Keep the policy if you can afford premiums; traditional plans are good for disciplined long-term saving and protection.
• Avoid surrendering in early years—value is very low.
• Read your policy document carefully for special clauses.
• If surrendering, submit correct documents to avoid rejection.

Common Mistakes to Avoid

• Submitting incomplete forms or wrong documents
• Surrendering without checking exact value or alternatives
• Forgetting to update bank details
• Not keeping copies of submitted papers
• Ignoring tax impact

Frequently Asked Questions 

Can I surrender my LIC policy online completely?

Partially yes—you can start and download forms online, but final submission is usually at the branch.

Can I cancel my LIC policy before maturity?

Yes, after meeting eligibility. Use the surrender process described.

When can I surrender?

After minimum premiums (now often 1 year for SSV under new rules). Check your policy.

How to cancel within the free-look period (usually 15–30 days)?

Return the policy bond with a cancellation letter to the branch or agent. You get full premium refund minus medical/ stamp duty costs. Much better than normal surrender.

How to surrender after 1 year?

Possible under new 2024 rules for SSV. Contact branch for exact amount.

How much will I get?

Roughly 30%+ of premiums paid (higher with SSV and bonuses). Use calculator or ask LIC for exact figure.

Is it good to surrender after 10 years?

Better than early years, but still usually less than maturity. Consider paid-up or loan first.

How to convert to paid-up?

Stop premiums after minimum period; LIC converts automatically in many cases. Confirm with branch.

How long to get the money?

Usually 2–4 weeks after approval.

Can I revive after surrender?

No, surrender is final.

Surrendering an LIC policy is a personal financial decision. Weigh the immediate need for money against long-term protection and growth. If possible, explore alternatives like loans or paid-up status to keep some benefits. Always verify latest rules on the official LIC website or by visiting your branch, as guidelines can evolve. If you have doubts, speak to a trusted advisor before acting. Protecting your family’s future remains the core purpose of life insurance—choose wisely.