How to Close an LIC Policy Before Maturity: A Complete Guide

Life Insurance Corporation of India (LIC) policies are designed to offer long-term benefits and financial security. However, there are situations where policyholders might want to terminate their policy before maturity. Whether it’s due to financial constraints or a change in financial goals, closing an LIC policy requires careful consideration and understanding of the process. In this article, we’ll explain how to close an LIC policy before maturity, including the steps for offline and online closures.

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Why Close an LIC Policy Before Maturity?

Some common reasons for policyholders wanting to close their LIC policy before maturity include:

• Financial difficulties or inability to pay premiums.
• Desire to switch to a different insurance plan or investment.
• Immediate need for cash or liquidity.
• Disappointment with the policy’s returns or benefits.

However, terminating a policy early can lead to financial loss due to surrender charges and reduced benefits. It’s crucial to evaluate all options and consult a financial advisor before making the final decision.

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Options to Close an LIC Policy Before Maturity

1. Surrender the Policy
   • When you surrender your LIC policy, you receive the surrender value, which is a portion of the premiums paid.
   • Surrender value is calculated based on the number of premiums paid and the policy’s duration.
   • Policies usually acquire surrender value only after completing three years of premium payments.
2. Policy Loan
   • If you need immediate funds but want to keep the policy active, you can opt for a policy loan instead of closing the policy.
   • Loans are granted against the policy’s surrender value and usually come with favorable interest rates.
3. Paid-Up Policy
   • If you no longer wish to pay premiums but want some benefits, you can convert the policy into a paid-up policy.
   • This option reduces the sum assured, but the policy remains active.

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How to Close an LIC Policy Offline

1. Visit the LIC Branch
   • Go to the LIC branch where you purchased the policy.
2. Submit a Written Request
   • Request a policy surrender form (Form No. 5074) from the branch.
   • Fill out the form with accurate details.
3. Provide Necessary Documents
   • Policy bond (original).
   • Identity proof (Aadhaar, PAN, or Passport).
   • Bank account details (cancelled cheque or passbook copy).
   • Proof of address, if required.
4. Verification and Approval
   • LIC will verify your documents and process your request.
   • Once approved, the surrender value will be credited to your bank account within 7-10 working days.

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How to Close an LIC Policy Online

LIC has made the process of closing policies easier with its online services. Here’s how you can close your LIC policy online:

1. Log in to LIC’s Official Website
   • Visit www.licindia.in and log in using your credentials. If you don’t have an account, register using your policy details.
2. Navigate to Policy Services
   • Once logged in, go to the “Customer Services” section.
   • Select “Policy Surrender” from the list of services.
3. Fill Out the Online Form
   • Complete the surrender request form with accurate details.
   • Upload the required documents, including your policy bond and ID proof.
4. Submit and Track Status
   • Submit your request online and note the reference number for future tracking.
   • LIC will review your request, and upon approval, the surrender value will be credited to your account.

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Points to Keep in Mind

1. Surrender Charges:
   • LIC policies come with surrender charges that reduce the final payout.
   • The earlier you close the policy, the higher the charges.
2. Loss of Benefits:
   • Terminating a policy before maturity may result in losing accumulated bonuses or benefits.
3. Tax Implications:
   • Surrendering a policy may have tax implications, especially if the premiums exceed 10% of the sum assured.
4. Alternatives:
   • Explore other options like converting the policy to paid-up status or taking a policy loan.

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1. Can I close my LIC policy before three years?

• Most LIC policies cannot be surrendered before completing three years of premium payments.

2. How long does it take to process a policy closure?

• It usually takes 7-10 working days for the surrender value to be credited after approval.

3. Will I get a full refund if I close my policy early?

• No, you will receive the surrender value, which is typically lower than the total premiums paid.

4. Can I close my LIC policy from any branch?

• While it’s recommended to visit the branch where you purchased the policy, some branches may assist with closures from other locations.

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Closing an LIC policy before maturity is a significant decision that should be made with caution. Evaluate all available options, understand the financial implications, and choose the method that best suits your needs. Whether you opt for offline or online closure, ensure all required documents are in order to expedite the process.

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