POSTED BY August 27, 2013 12:44 pm COMMENTS (19)

ONHi All,

I have taken Jeevan saral policy in dec 2008. I want to discontinue this policy as I am opting for term insurance. My doubts are:-

1) Should i surrender this policy now(would be getting around 90% please confirm)

2) Should i surrender after paying 5th installment which is due in this dec(will be getting 100% please confirm)

3) or not pay installment and make it paid up policy as suggested by agent(not sure of benefit)

Thanks,

Dipesh

Dear Dipesh, thanks for the update.

Thanks

Ashal

Hi All,

Jusy FYI, I have surrendered the policy yesterday as it completed 5 years on 17th Dec. The surrender process is very simple. You have to fill a form, paste 1 rupee revenue stamp and submit one cancelled cheque, along with original policy document.

Thanks,

Dear Anshul, as you have already paid 5 prem. till FY 2012-2013 (Dec 2008, 09, 10, 11 and 2012), you can surrender the policy in Dec 2013 without worrying about tax saving reversal for previous FYs as well as surrender amount ‘ll also be tax free.

Thanks

Ashal

So, Ashal you mean if the policy started in Dec 2008 and surrendered in Dec 2013 then tax benefits taken earlier will be reversed whereas if it is surrendered in Jan 2014, neither tax benefits taken earlier will be reversed nor the surrender value will be added into taxable income.

Please confirm the two points.

Dear Arpit, can you elaborate more on this ‘GOOD POLICY’ thing?

thanks

Ashal

Jeevan Saral is a good policy from LIC. I would suggest that if you are not in urgent need of money then continue with this policy till 10th year. in between if you require money then better to take loan on this policy. This policy gives excellent returns from 10th year onwards with assured sum values. Also the bonus declared on this policy gets added to your sum later. If you need a tabular flowchart of returns i do have a copy which i’ll be happy to mail you.

Ashal,

Please could you clarify where do you get 5 Year duration for 80C.

As per 80C

(5) Where, in any previous year, an assessee—

(i) terminates his contract of insurance referred to in clause (i) of sub-section (2), by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,—

(a) in case of any single premium policy, within two years after the date of commencement of insurance; or

(b) in any other case, before premiums have been paid for two years; or

Further,

(8) In this section,—

(iii) “insurance” shall include—

(a) a policy of insurance on the life of an individual or the spouse or the child of such individual or a member of a Hindu undivided family securing the payment of specified sum on the stipulated date of maturity, if such person is alive on such date notwithstanding that the policy of insurance provides only for the return of premiums paid (with or without any interest thereon) in the event of such person dying before the said stipulated date;

(b) a policy of insurance effected by an individual or a member of a Hindu undivided family for the benefit of a minor with the object of enabling the minor, after he has attained majority to secure insurance on his own life by adopting the policy and on his being alive on a date (after such adoption) specified in the policy in this behalf;

Dear Dipesh, please read my reply again. If you are surrendering the policy in the first 5Y, the tax benefits are to be revert back on the surrender year.

The SV ‘ll be tax free only after completion of 5Y in the policy not the 5 Prem. paid.

Thanks

Ashal

Dear Ashal,

So you mean since I have made 5 premiums of this policy so I don’t have to worry about tax benefit claimed after I surrender this policy. Please validate if my understanding is correct.

Thanks,

Dipesh

Just to add on, if I surrender the policy will the amount given to me be taxable. If yes, won’t it be better I idea to make it paid up policy(if I am not in need of immediate money) Need some maths to understand which is beneficial. If anyone can help.

Dear Amar, if the policy is surrender in the 1st 5Y, any tax benefit claimed on it under section 80c ‘ll be reversed in the year of surrender.

thanks

Ashal

Dear Dipesh, so now you can decide, what to do with your policy. 🙂

Thanks

Ashal

Guaranteed Surrender Value:

The policy can be surrendered after it has been in force for at least 3 full years. The Guaranteed Surrender value will be equal to 30% of the total amount of premiums paid excluding the premiums for the first year and all the extra premiums and premiums for accident benefit / term rider.

Special Surrender Value:

80% of Maturity Sum Assured if 3 or more years’ but less than 4 years’ premiums have been paid; 90% of the Maturity Sum Assured, if 4 or more years’ but less than 5 years’ premiums have been paid and 100% of the Maturity Sum Assured, if 5 or more years’ premiums have been paid. The Maturity Sum Assured for this para will be the Maturity Sum Assured corresponding to the term for which premiums have been paid under the policy.

Corporation’s policy on surrenders:

In practice, the Corporation will pay a Special Surrender Value – which is usually higher than the Guaranteed Surrender Value. This value will depend on the duration for which premiums have been paid and the policy duration at the date of surrender. In some circumstances, in case of early termination of the policy, the surrender value payable may be less than the total premium paid.

Dear Ashal,

I have got below reply from LIC on mail.

============================

Surrender value as on today is Rs.139681/- approximately.

For surrendering the policy, please submit Surrender Discharge Form duly completed,stamped with one Rupee revenue stamp,signed,dated and witnessed.

Also, submit cancelled cheque with your name printed on the cheque with IFSC code of the Bank, or zerox copy of first page of Bank Passbook. The surrender amount will be credited directly to your Bank Account.

We advise you not to surrender the policy.

Our telephone number : 022 67144506.

HOD/PS.

===========================================

I have annual prem. of 35280. So i think they are giving 100% of 4 premiums. Only 1st premium i’ll not get.

Thanks,

Dipesh

Dear Dipesh, you can not get 1st year’s prem. in any plan of LIC. So whatever SV is there ‘ll it ‘ll be on the remaining prem. paid by you. If you are adequately insured, in my personal opinion, surrender now.

Thanks

Ashal

What are the tax implications on surrender? If we have the 80C benefit earlier, what should be done now? How to treat this?

Based on information on the LIC website (http://www.licindia.in/special_plan_001_benefits.htm), the post-surrender returns are of the order of ~70% (after 4th installment) and ~80% (after 5th installment) of the paid premium amounts.

One could also convert it to a paid-up policy. But mathematically that won’t make sense to most of us. With in a span of less than 2-3 yrs, we can easily (even with just FD) recover the lost premium and then some…

Dear Ashal,

90% and 100% are part of total premium deposited by me which I’ll get after I surrender the policy.(90% after 4th premium and 100% after 5th premium) I called LIC office they asked me not to stop it and rather taking loan against policy if i was in immediate need. I told I am insured enough hence don’t want this policy now. They told me how much loan I was eligible for and said on surrender the amount given to me will be approximately same and they cant confirm on phone.

Dear Dipesh, 90 or 100% of what you are referring to here?

thanks

Ashal