Can I Surrender an LIC Policy After Availing a Loan Against It?

Many policyholders often have questions regarding the surrender of their LIC policy even after availing a loan against it. The answer is yes, but there are a few important points to consider.

Outstanding Loan Amount

When you surrender a policy with an outstanding loan, the loan amount will be deducted from the surrender value. The surrender value is the residual amount that you will receive after the loan is accounted for. This makes it crucial to understand the current state of your policy, including the amount you still owe.

Surrender Value

It is essential to ensure that your policy has acquired a surrender value. Not all policies may have a surrender value, especially during the early years of the policy term. This could means that if your policy is not substantial enough to have a surrender value, you might not be able to surrender it.

Policy Terms and Conditions

Each LIC policy comes with specific terms and conditions regarding the surrender process. It is crucial to check these conditions to understand any potential restrictions or requirements that must be met before proceeding with the surrender.

Documentation and Process

To successfully surrender your policy, you will need to provide necessary documents to the LIC office. Typically, this includes your policy document and an application for surrender. It is advisable to follow the documented process to avoid any complications.

Impact on Coverage

Surrendering the policy will result in the loss of the life cover provided by the policy. Therefore, it is important to weigh the benefits of retaining the policy versus surrendering it.

Alternatives to Surrendering

Instead of surrendering the policy, it is often better to continue it and pay the interest half yearly. This approach helps in retaining the benefits of the policy while meeting the financial obligations.

Additionally, the loan provided against the policy is typically around 60% of the surrender value. By paying the interest regularly, you may still be able to receive some funds upon closing the policy. However, it is crucial to ensure that the rules and regulations stipulated under the policy and the loan agreement are followed.

Professional Advice

For detailed guidance specific to your policy, it is advisable to contact your LIC agent or the nearest LIC office. They can provide the necessary guidance and ensure that all requirements are met.

Final Advice

Given the complexities involved, my sincere advice is to revive and continue your policy. By paying the interest portion half yearly, you can manage the loan and continue benefiting from the insurance coverage. If you redeem the policy, you may lose the ability to take a new policy in the future.

Since your policy has multiple benefits and includes family provisions, keeping the insurance coverage intact is in your best interest.