Yes — you can cancel your lic policy before it matures. This is officially known as surrendering the policy and is permitted under lic terms. However, it’s important to understand the conditions and consequences before taking this step.

🕒 When Can You Surrender?

LIC does not allow a full return of premiums if you stop the policy immediately after purchase. You must have paid premiums for a minimum period before surrender value applies:

• Regular or limited premium plans
  • If the policy term is ≤ 10 years — you usually need at least 2 full years of premiums.
  • If the policy term is > 10 years — typically 3 years of premiums are needed before surrender value applies.
• Single‑premium policies
  • You generally can surrender after the second year.
• Before these minimum periods, the surrender value is typically zero — meaning you get nothing back.

💰 What Happens When You Cancel?

When you surrender your lic policy:

❌ Coverage Ends Immediately

Your life insurance protection stops, and neither you nor your family can claim any benefits — even for events occurring shortly after surrender.

💸 You Receive a “Surrender Value”

The insurer pays you a cash value for the policy, known as the surrender value, which is usually much lower than what you’ve paid in premiums and what you would have received at maturity.

• Guaranteed Surrender Value (GSV): In most lic traditional plans, the GSV is around 30% of the total premiums paid (excluding the first year, extra premiums, riders, etc.) — but this can vary based on the plan and years of premium payment.
• Special Surrender Value (SSV): Sometimes higher than guaranteed value, depending on LIC’s performance; practices for SSV can change as per IRDAI guidelines.

For example:
If you’ve paid ₹1,00,000 in premiums over a few years, after meeting the minimum period you might only receive around ₹30,000–₹50,000 (30%–50%) when surrendering — in many cases even less than the premiums paid.

📉 Why the Loss Can Be Big

🔹 You Lose Insurance Coverage

The life cover feature ends instantly when you surrender the policy. So you lose financial protection for your beneficiaries.

🔹 Bonuses & Riders Are Lost

Any bonuses accrued, rider benefits (like accidental riders), and such add‑ons are forfeited at surrender — they aren’t usually added to the surrender value.

🔹 Tax Benefits Are Reversed

If you claimed tax deductions under Section 80C or exemptions under Section 10(10D) on this policy, those benefits might be reversed on cancellation.

🔹 No Revival After Full Surrender

Once a policy is fully surrendered and surrendered value paid, you cannot revive or restart that same policy — it’s effectively closed.

📊 Example: Typical Loss Scenario

Time Held

Premiums Paid

Approx. Surrender Value (%)*

Result

After 2–3 years

₹1,00,000

~30% (~₹30,000)

Big loss

After 5+ years

₹1,50,000

~40–50% (~₹60,000–₹75,000)

Still < total paid

At maturity

₹matching term

~100% + bonuses

Best outcome

*Actual % varies with policy type and lic rules; newer IRDAI guidelines can allow better surrender values, but it’s still much less than premiums.

✅ Alternatives to Surrendering

Instead of surrendering, consider other options:

🟡 Paid‑Up Policy

If you stop paying premiums after a few years (after acquiring surrender/paid‑up rights), your policy may become paid‑up, meaning:

• You lose no more premium payments,
• Policy continues with reduced benefits proportional to premiums paid.
• You might get a maturity value later — often more than surrender value.

🟡 Reviving a Lapsed Policy

If you temporarily stop paying premiums but haven’t surrendered, you sometimes can revive/reinstate the policy by paying outstanding dues plus interest, preserving original benefits (if done within a limited period).

🧠 Final Take: Why Surrendering Is Usually Not Recommended

• You typically get much less than what you paid in premiums.
• You lose life cover, bonuses, riders, and tax benefits.
• Starting a new policy later could cost more due to higher age and risk.
• Only consider surrender if you desperately need funds or there’s no viable alternative.

📌 In Summary

✔️ You can cancel your lic policy mid‑term by surrendering it.
✔️ You must typically have paid premiums for 2–3 years before any surrender value applies.
✔️ The amount you receive is usually much lower than total premiums paid — often 30% or so — and some recent rules can raise that percentage in later years.
✔️ Cancellation means loss of coverage, bonuses, and tax benefits — making surrender a costly choice financially.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.