LIC Policy Surrender — How to Surrender LIC Policy and Get Money Back

What is LIC Policy Surrender?

Surrendering an LIC policy means terminating your life insurance policy before its maturity date and receiving a lump sum amount called the surrender value. Once you surrender, the policy ends — you lose the life cover, future bonuses, and all other benefits attached to it.

People surrender their LIC policies for various reasons:

• Financial emergencies — urgent need for cash
• Unable to pay premiums — can't afford continued payments
• Better investment options — found higher-return alternatives
• Policy no longer needed — life circumstances changed

⚠️ Important: Surrendering a policy almost always results in a financial loss compared to holding it till maturity. Consider alternatives like making the policy paid-up or taking a loan against it before surrendering.

Types of Surrender Value

When you surrender an LIC policy, the amount you receive depends on two types of surrender values. LIC pays you whichever is higher.

1. Guaranteed Surrender Value (GSV)

This is the minimum amount LIC guarantees you'll receive upon surrender. It is calculated as:

GSV = (Total Premiums Paid × Surrender Value Factor) + Surrender Value of Vested Bonuses

• The Surrender Value Factor depends on how many premiums you've paid versus total premiums payable
• Typically ranges from 30% to 90% of premiums paid — increases as the policy matures
• First-year premium and extra/rider premiums are excluded from the calculation

2. Special Surrender Value (SSV)

This is usually higher than GSV and takes into account:

• Basic sum assured
• Vested reversionary bonuses
• Terminal/final addition bonus (if any)
• A Special Surrender Value Factor that varies by policy type and term completed

SSV = (Sum Assured + Vested Bonuses) × Special Surrender Value Factor

LIC will pay you the higher of GSV or SSV.

IRDAI 2024 Update

As per new IRDAI (Insurance Products) Regulations 2024 effective from 1 October 2024:

• Policyholders can now receive Special Surrender Value even after just 1 year of premium payment (for non-single premium policies)
• Surrender value factors have been revised upward for many policy types
• This is a significant improvement over the earlier 3-year minimum rule for many plans

When Can You Surrender Your LIC Policy?

Your LIC policy becomes eligible for surrender based on these rules:

Key points:

• If you haven't paid the minimum required premiums, you get nothing — the policy simply lapses
• The surrender value increases significantly in the later years of the policy
• Surrendering in the first few years typically results in a very low payout (30-35% of premiums paid)

How to Surrender LIC Policy

You can surrender your LIC policy through two methods:

Method 1: Online via LIC Customer Portal

1. Visit the LIC customer portal at customer.licindia.in
2. Log in with your registered credentials
3. Go to "Policy Services" or "e-Services"
4. Select "Surrender" or "Policy Surrender"
5. Choose your policy from the list
6. The portal will show the estimated surrender value
7. Confirm the surrender request
8. Enter your bank account details (NEFT/RTGS) for payout
9. Submit — you'll receive a reference number

💡 If you haven't registered on the LIC portal yet, you'll need to create an account first. Check our guide on LIC policy status check online for portal registration steps.

Online payout timeline: 7-15 working days to your bank account.

Method 2: Visit LIC Branch Office

1. Locate your nearest LIC branch (preferably the servicing branch mentioned on your policy)
2. Carry all required documents (listed below)
3. Fill the surrender form (Form No. 5074) available at the branch
4. Submit the form along with original policy bond and documents
5. The branch will process your request and verify details
6. Surrender value will be credited to your bank account or paid by cheque

Branch payout timeline: 7-15 working days after submission.

Documents Required for LIC Policy Surrender

Keep these documents ready before initiating surrender:

• ✅ Original policy bond/document
• ✅ Surrender request form (Form No. 5074)
• ✅ ID proof — Aadhaar card, PAN card, or passport
• ✅ Address proof — Aadhaar, utility bill, or bank statement
• ✅ Cancelled cheque or bank passbook copy (for NEFT transfer)
• ✅ PAN card (mandatory if surrender value exceeds ₹1,00,000 for TDS purposes)
• ✅ NEFT mandate form with bank details
• ✅ Discharge form (provided by LIC)

If the original policy bond is lost, you'll need to submit an indemnity bond and a lost policy affidavit along with an FIR or declaration.

How Surrender Value is Calculated

Here's a simplified example to understand the calculation:

Example:

• Policy: LIC Jeevan Anand (Plan 149)
• Sum Assured: ₹10,00,000
• Policy Term: 20 years
• Premium: ₹50,000/year
• Premiums Paid: 10 years (₹5,00,000 total)
• Vested Bonus: ₹3,00,000

GSV Calculation:

• Surrender Value Factor (after 10 of 20 years): ~50%
• GSV = (₹5,00,000 – first year premium ₹50,000) × 50% + Bonus Surrender Value
• GSV ≈ ₹2,25,000 + ₹90,000 = ₹3,15,000 (approximate)

SSV Calculation:

• SSV Factor (for 50% term completed): ~45%
• SSV = (₹10,00,000 + ₹3,00,000) × 45%
• SSV ≈ ₹5,85,000 (approximate)

You receive: ₹5,85,000 (higher of GSV and SSV)

📌 Actual values depend on the specific policy plan, term, and LIC's published surrender value factors. Contact your LIC branch or check the portal for exact figures.

Tax on LIC Policy Surrender

Surrendering an LIC policy has tax implications you must understand:

Section 10(10D) — Tax Exemption

The surrender value is tax-free under Section 10(10D) if:

• Annual premium is ≤ 10% of sum assured (for policies issued after 1 April 2012)
• Annual premium is ≤ 20% of sum assured (for policies issued before 1 April 2012)
• Policy is held for at least the minimum period

When Surrender Value is Taxable

If the above conditions are not met, the surrender amount is fully taxable as income under "Income from Other Sources" and added to your total income for the year.

Section 194DA — TDS on Surrender

• LIC deducts 5% TDS on the taxable portion (surrender value minus total premiums paid) if the amount exceeds ₹1,00,000
• 2% TDS from 1 October 2024 (as per Budget 2024 amendment)
• If you don't provide PAN, TDS is deducted at 20%
• You can claim TDS credit when filing your ITR

New Rule from FY 2023-24

For policies issued after 1 April 2023 with annual premium exceeding ₹5 lakh, the surrender value is taxable regardless of the 10% rule. Only the gain (surrender value minus premiums paid) is taxed.

💡 Always keep your PAN linked with your LIC policy to avoid higher TDS deduction. Check our guide on LIC premium payment online for keeping your policy details updated.

Alternatives to Surrendering Your LIC Policy

Before surrendering, consider these better options:

1. Make the Policy Paid-Up

If you can't afford premiums but don't need the money immediately:

• Stop paying premiums after the minimum required period (3 years typically)
• The policy continues with a reduced sum assured (called paid-up value)
• You still get maturity benefits (though lower) at the end of the policy term
• Life cover continues at a reduced amount

Paid-Up Value = (Sum Assured × Premiums Paid / Total Premiums) + Vested Bonuses

2. Loan Against LIC Policy

If you need cash but want to keep the policy:

• LIC offers loans up to 90% of surrender value
• Interest rate: Around 9-10% per annum (simple interest)
• Policy continues with full benefits
• Repay the loan at your convenience — it's deducted from maturity/claim amount if unpaid
• Apply online through the LIC portal or at your branch

3. Reduce Premium via Policy Conversion

Some LIC plans allow you to:

• Convert to a lower sum assured with reduced premiums
• Change premium payment frequency (annual to monthly for easier management)

4. Auto-Cover / Policy Revival

If your policy has lapsed:

• Revive it within 5 years by paying overdue premiums with interest
• Some policies have auto-cover that keeps the policy active using accumulated bonus

Important Tips Before Surrendering

1. Check your surrender value first — call LIC (1800 258 6400) or check the customer portal before deciding
2. Wait if close to maturity — the closer you are to maturity, the more you lose by surrendering
3. Compare alternatives — paid-up and loan options may serve you better
4. Consider tax impact — surrender proceeds may be taxable; consult a tax advisor
5. Update bank details — ensure your bank account linked to the policy is active
6. Keep all documents safe — especially the original policy bond
7. Don't surrender in the first 5 years — surrender value is extremely low in early years
8. Check bonus history — accumulated bonuses add significantly to surrender value in later years

Related Guides

• LIC Policy Status Check Online — 5 Easy Methods
• LIC Premium Payment Online — All Methods & Steps
• How to Open PPF Account Online
• Kisan Vikas Patra (KVP) Guide

Frequently Asked Questions (FAQs)

How long does it take to get money after surrendering LIC policy?

After successful submission of all documents, LIC typically credits the surrender value to your bank account within 7-15 working days. Online surrender through the LIC portal may be faster (7-10 days).

Can I surrender my LIC policy after 2 years?

Under the old rules, you needed at least 3 years of premium payment. However, under the new IRDAI regulations (October 2024), non-single premium policies can be surrendered after just 1 year of premium payment, though the surrender value will be very low.

What percentage of premium do I get back on surrender?

It depends on how long you've held the policy. Typically:

• After 3 years: 30-35% of premiums paid
• After 5 years: 40-50% of premiums paid
• After 10 years: 50-70% of premiums paid
• After 15+ years: 70-90% of premiums paid

Is LIC surrender value taxable?

It depends on your policy terms. If annual premium is within 10% of sum assured (for policies after April 2012), the surrender value is tax-free under Section 10(10D). Otherwise, the gain is taxable as income. TDS at 2-5% is deducted on taxable surrender amounts exceeding ₹1 lakh.

Can I cancel my LIC policy within 15 days?

Yes! LIC offers a 15-day free-look period (30 days for online purchases) from the date of receiving the policy document. During this period, you can cancel and get a full refund minus stamp duty and medical examination charges. This is not a surrender — it's a cancellation.

How do I check my LIC surrender value online?

Log in to the LIC customer portal at customer.licindia.in, go to your policy details, and look for the surrender value option. You can also call LIC helpline 1800 258 6400 (toll-free) for surrender value enquiry.

Can I surrender a term insurance policy?

No. Term insurance policies have no surrender value because they are pure risk cover policies with no savings/investment component. If you stop paying premiums, the policy simply lapses.