How do i surrender my LIC policies? Is there anyone who can help me, thanks

Ans: Surrender the Policy

You can surrender your LIC policy. This means you will stop the policy and receive the surrender value. The surrender value is usually less than the total premiums paid.


Paid-Up Policy

Convert your LIC policy to a paid-up policy. This means you stop paying premiums, and the policy continues with reduced benefits.

Consult CFP

Contact your CFP for specific details on surrender value, and paid-up policy options.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: considering citizenship changes and the associated tax implications on LIC policies is wise for your son. Surrendering these policies could indeed reduce his future tax burden as a resident of another country. Let’s go over some key points regarding this decision.

Dual Taxation Risks on Policy Maturity
Potential Double Taxation: If your son becomes a tax resident of another country, his worldwide income may be taxable there. This includes any proceeds from Indian LIC policies, which could lead to double taxation.

Taxable in India on Maturity: Certain LIC policy proceeds are taxable in India upon maturity, particularly if the sum assured is below a specific premium-to-sum-assured ratio.

Complex Tax Reporting: He may have to report these policy earnings in both India and his new country of citizenship, leading to more complex tax filings.

Evaluating Surrendering LIC Policies
Immediate Surrender Value: If the LIC policy is surrendered before maturity, he would receive the surrender value, which might be lower than the maturity amount but could save him from future taxation abroad.

Avoid Future Taxable Events: By surrendering the policy, your son can avoid potential tax issues on future policy payouts, including long-term foreign tax on maturity proceeds or accrued income.

Penalty-Free Options: In some cases, LIC policies allow for partial or full surrender without significant penalties after a certain policy tenure. It’s worth reviewing his specific policy terms.

Potential Alternative Investment Options
Mutual Funds and NPS: If he has an investment horizon and can manage moderate risk, he could reinvest the surrender value in mutual funds. Actively managed funds in India can offer tax-efficient returns for long-term goals compared to LIC policies, especially if his tax residency shifts.

Top Tax-Efficient Options: Tax-free bonds, hybrid mutual funds, or other options that align with his risk profile can offer more flexible and efficient returns. Investing through a Certified Financial Planner can ensure a suitable asset mix.

Insurance Coverage Alternatives: If LIC policies also provide insurance, he may want to consider term insurance in the new country for essential risk cover without tax complexities.

Important Steps Before Surrendering Policies
Calculate Surrender Value: He should review the surrender value and compare it with the remaining tenure and expected benefits of the LIC policies to make an informed decision.

Consult a Tax Expert: Dual taxation implications can be complex, especially with international treaties and tax laws. Consulting a tax expert in both India and the new country is advisable.

Consider Exchange Rate Impact: The value of the maturity proceeds might fluctuate with exchange rates. Surrendering the policy can give him more control over the funds in his currency of choice.

Final Insights
Your son’s decision to surrender LIC policies before changing citizenship can offer relief from dual tax obligations, simplify his tax filing process, and provide him with a more flexible and tax-efficient investment portfolio. Examining his goals, needs, and future tax considerations will allow him to make the most effective decision.

Best Regards,
K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Hello;

You can apply for duplicate policy certificates from LIC by the process laid down for the same.

It is quite cumbersome so better would be if you can search and find policy certificates at your home or agent office.

The agent seems to have provided you with incorrect information.

You are entitled to receive sum assured under the life insurance policies taken for your late father.

Best wishes;

Ans: Your sister-in-law and her husband have made the right decision to surrender their LIC policies. Since they have not paid premiums for seven years, the policies are already in a lapsed state. It is best to recover whatever surrender value is available and reinvest it wisely.

Since they are abroad and have entrusted you with their LIC documents, you will need to follow a structured approach to complete the surrender process.

Below are the answers to your queries in detail.

1. Can You Submit the Surrender Form on Their Behalf?
Yes, you can submit the surrender forms on their behalf. However, LIC requires proper authorization from the policyholders. You will need an authorization letter from them, along with the required documents.

2. Required Documents for Policy Surrender
When visiting the LIC branch, you need to carry the following documents:

Original LIC Policy Bonds for each policy.
Duly filled and signed Surrender Form for each policy.
Authorization Letter from the policyholders allowing you to surrender on their behalf.
Self-attested copies of the policyholders’ passports (as they are abroad, this is essential for identity verification).
Copy of the latest premium receipt (if available).
Bank account details of the policyholders (a cancelled cheque or bank passbook copy).
NEFT Mandate Form duly filled and signed by the policyholders for direct credit of the surrender value.
A self-attested copy of your Aadhaar and PAN card (for branch verification purposes).
3. Is a Separate Surrender Form Required for Each Policy?
Yes. You need to submit a separate surrender form for each LIC policy. Since there are six policies, you must fill six separate forms. LIC processes each policy independently.

4. Is an Authorization Letter Required?
Yes. Since you are handling the surrender process on their behalf, LIC will require a properly signed Authorization Letter from both policyholders. This ensures LIC has legal consent from the policyholders to process the surrender request through you.

5. Format of the Authorization Letter
The letter should be addressed to the specific LIC branch where the policies were issued.

6. Should the Authorization Letter Be Handwritten or Typed?
The letter can be typed and then printed. However, LIC requires the policyholder’s signature to be handwritten. The policyholder must print, sign, and send a scanned copy to you.

For added authenticity, it is advisable for them to sign in blue ink and include a copy of their passport for identity verification.

7. Can the Surrender Amount Be Credited to a Different Person’s Account?
No. LIC strictly credits the surrender amount only to the policyholder’s bank account. The policyholder must provide a cancelled cheque or a bank passbook copy in their name for verification.

If they do not have an Indian bank account, they may have to:

Reopen an Indian account and provide the details to LIC.
Nominate an Indian joint account holder (like a parent) where LIC can transfer the amount.
Check with LIC if direct remittance to an NRO/NRE account is possible.
8. Can the Surrender Amount Be Claimed Online from Abroad?
No, LIC does not have a fully online process for surrendering policies. The policyholder (or an authorized representative) must visit the branch in person to submit the documents.

However, LIC may allow online submission of NEFT details and certain forms through email in some cases. Your sister-in-law and her husband should check with the LIC branch for any specific exemptions.

Additional Considerations
Apart from the above queries, here are a few additional insights:

Tax Implications: If the LIC policies were held for less than five years before lapsing, the surrender value may be taxable. If they were held beyond five years, tax implications will depend on policy type.

Processing Time: LIC usually takes 7-15 working days to process surrender requests. The amount will be credited directly to the provided bank account.

Policy Status: Since premiums have not been paid for seven years, some policies might have acquired a paid-up status rather than surrender value. You can confirm the exact surrender value from the LIC branch.

Final Insights
Your sister-in-law and her husband are making the right decision to surrender these LIC policies. Traditional LIC plans usually provide low returns (4-5%), which do not even beat inflation. Since they have already lapsed, it is better to reclaim whatever surrender value is available.

Instead of keeping the surrender amount idle, they should invest in high-return options like mutual funds for wealth growth. Since they are abroad, they should consider a mix of international and Indian investments to maximize returns.

If they want a structured investment plan, they can consult a Certified Financial Planner (CFP) to reinvest the proceeds efficiently.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment