You will get more money even if you leave the LIC policy midway, understand the complete math.

Under the new rules, now the surrender value will be calculated in a new way. If you have paid a premium for 4 years and surrender the policy, then earlier you used to get 2.4 lakhs out of 4 lakhs, but now you will get up to Rs 3.1 lakh.

There is good news for the customers who leave the policies of LIC and other insurance companies midway. IRDAI (Insurance Regulatory Authority of India) has made a big change in the rules of surrender value. Under the new rules applicable from October 1, 2024, now policyholders will get 20-30 percent more money back than before.

What is surrender value?

When a person closes his life insurance policy before maturity, the amount returned by the insurance company is called surrender value. This amount depends on how many years you have paid the premium and what type of policy you had taken.

What changes have been made in the new rules?

IRDAI has made many important changes in the rules related to surrender value. Now Special Surrender Value (SSV) will be applicable on all endowment policies. This means that now customers will get more money than before on surrendering the policy. Earlier, nothing was received on surrender for two years, but now only a partial amount will be returned after one year.

How much money will be received?

Under the new rules, now the surrender value will be calculated in a new way. If you have paid premium for 4 years and surrender the policy, then earlier you used to get 2.4 lakhs out of 4 lakhs, but now you will get up to Rs 3.1 lakh. On the other hand, if you have paid premium for only 1 year, then earlier you did not get anything, but now you can get up to Rs 62,000 out of 1 lakh.

How will the surrender value be calculated?

IRDAI has decided a new formula for calculating the surrender value. Now the interest rate of 10-year government bond will be made the basis. Insurance companies can add up to a maximum of 0.50 per cent to it. This new method will also apply to single premium and policies with a term of less than 5 years.

What to do if the policy has to be surrendered?

If you want to surrender your policy, first go to the official website of LIC and use the surrender value calculator. After this, submit Form 5074 at your nearest LIC branch. Keep in mind that you will have to carry all your KYC documents and policy details with you.

Which policies will the new rules apply to?

It is important to know that these new rules will apply only to new policies issued after October 1, 2024. The earlier rules will still apply to old policies. Therefore, if your policy is old, you will not get the benefit of the new rules.

Why were these changes made?

The main objective of IRDAI is to protect the interests of insurance customers. Earlier, many customers had to suffer huge losses on surrendering the policy. The new rules will increase transparency and customers will get the right information. Now, at the time of buying the policy, customers will be told how much money they will get back if they leave the policy midway.

If you are thinking of surrendering your policy, then first contact your LIC agent and get complete information about the new rules. If possible, instead of surrendering the policy, choose the option of making it paid-up (limited payment), so that you can get some benefits in the future.