Managing a LIC policy does not end with paying premiums; correct nomination, possible assignment, timely revival of lapsed policies, knowing when (and whether) to surrender, and using policy loans wisely are all crucial to getting full value from your cover. Exact rules and values for nomination, assignment, revival, surrender, and loans can vary by plan, policy vintage, and terms, so your original policy document and the latest LIC circulars always override any generic description. In 2025, LIC’s customer-education material and policy conditions clearly outline these rights and processes, but many policyholders still miss benefits or create claim hurdles simply because servicing actions were not done properly or on time.
Nomination is the most basic but critical step: it allows you to register the person(s) who can receive policy proceeds on your death, and LIC explicitly encourages policyholders to ensure that a valid nomination always exists and is updated after major life events like marriage, divorce, or the birth of children. Nomination can be created, changed, or cancelled by the life assured at any time during the policy term by submitting the prescribed form; it does not require stamp duty, and the change takes effect only when LIC records it in its register and endorses it on the policy/records.
Assignment is different from nomination: while nomination identifies who receives money on death, assignment legally transfers the rights in the policy itself to another person or entity, such as a bank, lender, or family member. Under Section 38 of the Insurance Act (as amended), assignments must be in writing and registered with the insurer, and LIC notes that they may be done even when a loan is not immediately required, for example as collateral or for estate planning, but the insurer can decline assignments that appear not bona fide or against policyholder interest. Once a policy is assigned absolutely, the assignee typically becomes the primary person entitled to benefits, and a fresh nomination is usually required after reassignment back to the original owner.
Revival becomes important if your policy lapses due to non-payment of premiums. LIC generally allows revival of lapsed policies within five years from the date of the first unpaid premium, subject to the policy’s terms, payment of arrears with interest, and the usual health/financial underwriting requirements. From time to time, LIC launches Special Revival Campaigns with concessions in late fees; for example, in 2025 a scheme offered up to 30% waiver of late fees (capped at ₹5,000) for eligible non-linked plans till October 17, though medical and risk requirements are not relaxed. These special campaigns are periodic and time-bound, so they should be treated as temporary opportunities rather than permanent features of all policies.
Surrender means voluntarily terminating the policy before maturity in exchange for the surrender value, and it is usually allowed only after the policy has acquired a minimum value (often after at least two full years’ premiums in many traditional plans, though exact conditions are plan-specific). LIC policies have two broad types of surrender values: Guaranteed Surrender Value (a minimum calculated using factors defined in the policy; for many traditional plans this may start at roughly 30% of eligible premiums after the minimum period) and Special Surrender Value, with the policyholder receiving whichever is higher at the time of surrender. Because surrendering can significantly reduce long-term benefits and internal rate of return, LIC and most advisors recommend it only after evaluating alternatives like revival, policy loans, or reducing Sum Assured; tools such as surrender-value calculators can help you estimate the impact before deciding.
Policy loans allow you to borrow against the surrender value of eligible LIC policies, providing liquidity without fully surrendering the contract. As per LIC’s policy-loan information, loans are sanctioned after the policy acquires a surrender value, up to a specified percentage of that value, and interest at rates decided by LIC from time to time (recently in the roughly 9–10% per annum range, typically payable half-yearly) is charged until repayment, with unpaid interest potentially added to the loan balance. If the outstanding loan plus interest ever approaches or exceeds the surrender value and is not cleared, LIC can adjust or terminate the policy, so borrowers should monitor loans closely and treat them as a temporary solution rather than a permanent source of funding.
In practice, smart LIC policy servicing means: keeping nomination updated, using assignment carefully when mortgaging or transferring rights, reviving lapsed policies within the permitted window instead of buying new ones blindly, surrendering only after understanding the value impact, and using policy loans prudently for short-term needs. For any specific action, especially complex assignments, revivals with health issues, high-value surrenders, or large policy loans, policyholders should refer to the latest LIC guidelines, check current values and rates with LIC, and where needed take help from a qualified advisor to avoid procedural mistakes that could delay or reduce future claims. This guide is for general information on typical LIC policy servicing features and should not be treated as a substitute for your individual policy contract or LIC’s official communications.
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