A life insurance policy is a long-term commitment to protect your loved ones in case of an unforeseen event. LIC (Life Insurance Corporation of India) is one of the most trusted insurers in India, offering a range of plans that combine protection and savings. But what if you're facing a financial emergency? Can you withdraw money from your LIC policy before maturity?
The answer depends on your LIC policy type, how long you've paid premiums, and the terms associated with withdrawal, surrender, or loan. While some policies allow partial withdrawal after a lock-in period, others may only offer surrender or loan options. Each comes with trade-offs especially if done prematurely.
In this article, we explain the early withdrawal rules for LIC policies, how much surrender value you can expect, and smarter alternatives like policy loans.
LIC Policy Withdrawal Rules: What You Need to Know
Let’s break it down based on policy types:
- Term Insurance Plans (ex., LIC’s Digi Term, LIC’s New Jeevan Amar)
- Pure protection plans, with no investment or savings component.
- No withdrawal or surrender value.
- If you stop paying premiums, the policy lapses. There’s no refund unless your policy has a Return of Premiums (ROP) feature.
- Loan not allowed.
- Endowment and Guaranteed Income Plans (ex., LIC’s Jeevan Labh, Jeevan Anand, Jeevan Rakshak, Bima Jyoti, Jeevan Saathi )
These plans build savings over time along with life cover for the life assured.
- LIC policy withdrawal after 2 or 3 years since purchase: You can surrender the policy after surrender value is accrued which is typically 2 to 3 years for Limited/Regular premium policies.
- You will be eligible for either the Guaranteed Surrender Value (GSV) or the Special Surrender Value (SSV), which will be paid out only if it meets certain policy criteria which vary by policy.
- These payouts are typically around 30% of the premiums paid to date. Premature surrender thus results in a loss against what you’ve invested and you lose future coverage and bonuses.
What about withdrawal after 5 or 10 years?
- Withdrawal after 5 years usually yields a slightly higher surrender value, typically 50% of paid in premiums and accrued bonuses.
- Withdrawal after 10 years offers even better value, usually over 70% of premiums paid in, but forfeits future maturity benefits and coverage.
Loan against LIC policy is possible once surrender value is accrued. This is often a better choice than surrendering.
- Money Back Plans (ex.,LIC New Money Back Plan 20 Years, LIC Bima Gold, Komal Jeevan)
Money Back Plans offer scheduled payouts at set intervals. (ex., at 20% of Sum Assured every 5 years, from the date of commencement of policy).
- These payouts are fixed and not on-demand, you cannot withdraw earlier than the scheduled payout dates.
- With premature withdrawal from/surrender of the policy before the payouts commence, you will only receive the surrender value.
- Loan available after surrender value accrues.
Use our LIC Surrender Value Calculator to estimate what you’ll receive if you surrender mid-term.
- ULIP Policies (ex., LIC’s SIIP, LIC’s New Endowment Plus)
These are unit-linked plans combining life cover with market-linked investments.
- Partial withdrawals are allowed after 5 years (post lock-in period) while keeping the policy benefits intact. You do not have to withdraw entirely from /surrender the policy.
- It has limitations on the amount you can withdraw partially, typically up to 20% of the fund value in a year
- Withdrawal doesn’t cancel the policy or life cover.
- Loans can be availed with us at Mera Kal, depending on fund value and insurer’s terms.
A smart option for short-term liquidity without compromising future gains.
What Happens If You Surrender Your LIC Policy Early?
Let’s take an example to understand the impact.
Ravi Mehra, a 42-year-old working professional, purchased the LIC Bima Jyoti (Plan 860) in March 2022. The policy offers a basic sum assured of Rs 6,00,000/- with a 20-year term. Ravi has been paying quarterly premiums of Rs 9,000/- for the past 3 years.
Now, due to an urgent financial need, he is considering policy surrender.
Here’s what happens if he surrenders the policy today:
- Total premiums paid so far: Rs 1,26,000/- (assuming all premiums have been paid to date)
- Estimated surrender value today: Rs 50,400/- (40% of premiums paid to date)
- Loss compared to premiums paid: Rs 75,600/-
But the bigger loss is in what Ravi would be giving up in the future.
If Ravi continues his LIC Bima Jyoti policy till maturity, he stands to receive:
- Sum Assured: ₹6,00,000/-
- Guaranteed Additions (estimated): ₹2,00,000/-*
- Total Maturity Benefit: ₹8,00,000/- (conservatively assuming 2 lakhs in total future additions by maturity)
By surrendering the policy now, he receives only ₹50,400/-, and forfeits his life cover and the remaining ₹7,47,600/- in potential future value of the premiums paid and to be paid.
Summary: What Are Your Options Based On Your Policy Type?
Make the Right Choice
Withdrawing from your LIC policy early is possible—but the path you choose matters. Whether it's:
- Premature surrender (with consequences),
- Partial withdrawal in ULIPs, or
- Taking a loan to meet your immediate needs each comes with trade-offs that should be evaluated carefully.
At Mera Kal, we understand the value of your life insurance policy and the importance of retaining its benefits.
As your trusted Loan Service Provider for policy loans, we are partnered with lenders who practice transparent loan processes, offer competitive rates, and expert guidance. With our LIC Withdrawal Calculator and Life Insurance Loan Eligibility Checker, we help you navigate the decision-making process on your policy loan and help secure your financial future. Choosing a loan against a life insurance policy is a smarter alternative to surrendering it. It preserves your policy benefits while providing the funds you need.
*Guaranteed Additions: LIC Bima Jyoti offers ₹50/- per ₹1,000/- Sum Assured per year as guaranteed additions for the entire premium-paying term.