How to Cancel LIC Policy and Get a Refund: Free Look and Surrender

Cancelling an LIC policy and getting a refund involves two very different scenarios depending on when you decide to cancel.

## Option 1: Free Look Period (Best Case — Get Full Refund)

LIC provides a **30-day free look period** from the date of receiving your policy document. If you cancel within 30 days, you get a near-complete refund — deducting only: - Medical examination charges (if any) - Stamp duty - Insurance cover charges for the days the policy was active

**How to cancel under Free Look:** 1. Write a cancellation request letter to your LIC branch 2. Attach the original policy document 3. Submit to the branch/servicing office within 30 days of policy receipt 4. Refund credited to your bank account within 15-20 working days

This is the clean exit. If you have any doubt about a policy, review it carefully during the free look period.

## Option 2: Surrender (After Free Look, Before Maturity)

Surrender is cancelling the policy after the free look period but before maturity. You receive the **Surrender Value**, which is significantly less than the total premiums paid (especially in early years).

**Surrender Value Formula:** Guaranteed Surrender Value (GSV) = 30% × (total premiums paid excluding first year) × (remaining policy term / total term)

Special Surrender Value (SSV) may be higher than GSV depending on accrued bonus.

**You receive the HIGHER of GSV or SSV.**

**Important:** Surrender value is only available after **3 years of premium payment**. Before that, surrendering gives you nothing.

## Surrender Value Example

20-year endowment plan, Rs 10 lakh SA, Rs 25,000 annual premium: - After 8 years (Rs 2 lakh total premiums paid): - GSV = 30% × Rs 1.75 lakh (excl. 1st year) × (12/20) = approximately Rs 31,500 - SSV = based on paid-up value + bonus — typically Rs 2.5-3.5 lakh

This means you get Rs 2.5-3.5 lakh against Rs 2 lakh paid — a small positive. But you lose the future maturity benefit of Rs 20-25 lakh.

## My Recommendation: Think Before Surrendering

Before surrendering, always consider: 1. Can you make the policy paid-up instead? (keep cover, stop premiums) 2. Can you take a policy loan to meet your cash need? 3. Can you afford to pay just the current premium and keep going?

Surrendering is often the worst financial decision. Call Ajay Kumar Poddar at 9415313434 before making this decision.