Strategies for Surrendering an LIC Policy: Understanding the Process and Alternatives

Introduction

If you are considering surrendering an LIC policy, you need to understand the potential challenges and the alternatives available to you. In this article, we will explore the issues with surrendering with LIC and provide guidance on how to proceed effectively.

The Challenges of Surrendering an LIC Policy

1. Full Payback Sacrosanctity of LIC

First and foremost, never buy a policy from LIC. While LIC is a government-backed company and often seen as a secure option, it has its own set of challenges, especially when it comes to policy surrender.

LIC's Attitude: LIC is completely Sarkari (government-related) with a very bureaucratic approach. They are proactive when you buy the policy but their response is often very poor when it comes to surrendering the policy. Agent Commission: LIC offers the maximum commission to their agents, which often leads to biased advice. Some agents advise not to surrender the policy before maturity because they receive a substantial commission from each premium payment, leading to a lower growth rate compared to other players like SBI Life. Branch Limitations: LIC policies can only be surrendered at the branch where they were originally issued. This can be a significant challenge, especially if you have moved to a different location. Obstacles During Surrender: LIC may try to come up with strange excuses or document-related issues to discourage you from surrendering the policy. Target-Driven Agents: Agents may issue policies at branches where they are lacking targets, which can lead to mistakes and suboptimal policy terms. You will be the ultimate sufferer in such cases.

Personal Experience: Despite these challenges, some agents may argue that historical data shows high returns. However, these experiences are often based on a handful of personal cases and do not represent the overall market performance.

Alternatives to Surrendering

1. Financial Emergency Considerations

Before deciding to surrender your policy, consider if you truly have a financial emergency. If so, and if there are no other options, then surrendering could be the right choice. However, if you have alternative solutions, it is advisable to consider them first.

2. Pausing Premium Payments

Another option is to stop paying premiums on your policy. Even though the policy's value will be reduced, you can claim a reduced value at maturity or in case of death.

3. Understanding Surrender Process

If you still decide to proceed with the surrender, here’s what you need to know:

Surrender Form: Obtain the surrender form from your servicing branch. Exit Interview Form: Fill in the exit interview form to understand your policy details clearly. KYC NEFT Form: Provide your bank details such as bank statements or canceled cheques, along with the original bond paper or policy certificate. Submit to Servicing Branch: Submit all the required documents to your servicing branch. If needed, you can also ask an agent for help.

Top Performing Insurance Providers

Based on long-term performance, the following are the top three providers that have given consistently good returns:

SBI Life PNB MetLife HDFC Life

Research and compare the policies from these providers with your current LIC policy to see if they might be a better fit for your needs.

Conclusion

In conclusion, while surrendering an LIC policy can be a last resort, it is advisable to approach it with caution and understanding. Consider alternatives first and ensure you understand the process thoroughly. By doing so, you can make a more informed decision that aligns with your financial goals.