Postal Life Insurance Surrender Rules

by

Comprehensive Guide to Surrendering a Postal Life Insurance (PLI) Policy

Table of Content show

Postal Life Insurance (PLI) is a popular savings-cum-insurance scheme offered by the Department of Posts in India. While PLI policies are designed to provide long-term financial security, there may be circumstances where policyholders wish to surrender their policies before maturity.

However, surrendering a PLI policy involves specific rules, procedures, and implications that must be carefully understood Postal Life Insurance Surrender Rules.

This guide provides a detailed overview of the process, eligibility criteria, calculations, and other important aspects of surrendering a PLI policy.

Eligibility Criteria for Surrendering a Postal Life Insurance (PLI) Policy

Before initiating the surrender process, it is essential to ensure that you meet the following eligibility criteria:

  1. Policy Duration:
    The Postal Life Insurance policy must have been in force for at least three years (36 months) from the date of inception. Policies that do not meet this minimum duration cannot be surrendered.
  2. Premium Payment History:
    All premiums must have been paid regularly for at least 36 months. Any missed or delayed payments during this period may disqualify the policy from being eligible for surrender.
  3. These policies are not eligible for Surrender-Exclusions:
    Certain types of PLI policies, such as Money money-back policy – AEA- Sumangal PLI, Children Policy -PLI&RPLI, Gram Priya -RPLI & Sumangal-RPLI are not eligible for surrender.

postal life insurance withdrawal rules

Steps to Surrender a Postal Life Insurance (PLI) Policy:-

The process of surrendering a PLI policy involves several steps. Below is a step-by-step guide to help you to understand the procedure:

Step 1: Required Documents

To initiate the surrender process, you need to the following documents:

  • Original Policy Document: If the original policy document is unavailable, a duplicate copy or an indemnity bond (in case of a lost policy) must be submitted.
  • Premium Receipt Book: The premium receipt book must be included if premiums were paid in cash.
  • Loan Repayment Receipt Book: If the Postal Life Insurance policy has an outstanding loan, the loan repayment receipt book must also be submitted.

Step 2: Submit a Written Application

  • Please complete the Surrender Application Form provided by the post office. Ensure that all details, including your policy number, name, and contact information, are accurately filled out.
  • Attach the required documents and apply at the nearest Head post office( CPC). You do not need to visit the issuing post office, any nearby Head Post Office will suffice. Ensure to take the receipt of the original documents submitted, however, if you have lost your original policy bond, in this case, you may visit for a surrender request to the concerned Head Post Office.

Step 3: Policy Status During Processing

Once the surrender application is received by the approving authority, the policy remains in force until the end of the month in which the application was submitted and payment received if consequently, premiums were paid for this period.

Example:-

Premium paid up to May 2025.

Surrender approved date and payment- 15.06.2025

Even risk is covered upto – At the end of the month of surrender.

Calculation of Surrender Value

The surrender value of a PLI policy is calculated based on predefined formulas and depends on various factors, including the type of policy, premium payment history, and bonuses accrued.

Get the surrender value – You may check your Postal Life Insurance surrender value before you consider surrendering your policy. You may check the surrender value from the nearest post office, online portal, or PLI surrender calculator.

In case your PLI policy premium is unpaid for a long but more than 36 months, the surrender value can be checked only after converting your policy as paid up/reduced paid up by the CPC.

Key Points in Calculation:

  1. Annual Premium Payments:
    If the premium is paid annually in advance, the surrender value is calculated at the end of the year, regardless of when the surrender application was submitted.
  2. Paid-Up Value After 5 Years:
    If the policy has been in force for at least five years, the surrender value includes a proportional bonus. No bonus is paid if the policy is surrendered before completing five years.
  3. Impact of Outstanding Loans:
    If there is an outstanding loan against the policy, the surrender value will be reduced by the principal amount and any accrued interest.
  4. Final Amount:
    The final surrender value is communicated to the policyholder for confirmation. It is crucial to verify this amount before giving consent.

Approval Process

After submitting the surrender application, the process involves multiple levels of review and approval:

  1. Initial Review:
    The Postmaster or Manager of the Central Processing Centre (CPC) reviews the application and verifies the claimant’s title. The surrender value is then calculated using the prescribed formula.
  2. Seeking Consent:
    The calculated surrender value is communicated to the policyholder for written consent or dissent. This step ensures transparency and allows the policyholder to confirm or dispute the amount.
  3. Approval Authority:
  • If the surrender value falls within the approving authority’s jurisdiction, the case is approved locally.
  • For higher amounts, the application is forwarded to higher authorities for further review and approval.

4. Issuance of Payment Sanction:
Once the case is approved, the CPC issues a payment sanction order. The policyholder is informed about the approval and the next steps.

Payment of Surrender Value

The surrender value is disbursed after the completion of the approval process. Here’s how the payment is handled:

  1. Preferred Mode of Payment:
  • The surrender value is typically credited to the policyholder’s Post Office Savings Bank (POSB) account, if available.
  • Alternatively, the payment can be made via cheque or directly transferred to the policyholder’s bank account if the facility is available.

2. Disbursement Process:

  • The policyholder must surrender the payee’s copy of the order document at the post office if payment is made through Cheque.
  • A receipt must be signed upon receiving the payment. If necessary, the receipt should be properly stamped.

Withdrawing a Surrender Application

In certain cases, the policyholder may wish to withdraw the surrender application before the surrender value is paid. The following conditions apply:

  1. Valid Reasons:
    The approving authority may allow withdrawal if sufficient valid reasons are provided. These reasons should not adversely affect the interests of the insurance fund.
  2. Timely Withdrawal:
    The withdrawal request must be made before the surrender value is disbursed.

Important Considerations Before Surrendering a Policy

Surrendering a PLI policy is a significant decision with financial implications. Below are some key points to consider:

  1. Financial Loss:
    Surrendering a policy generally results in a loss, as the surrender value is often lower than the total premiums paid over the years. No bonus is awarded if PLI policy is surrendered before 5yr.
  2. Loss of Benefits:
    Upon surrender, the policyholder forfeits all future benefits, including death benefits and maturity payouts.
  3. Alternatives to Surrender:
    Instead of surrendering, explore alternatives such as taking a loan against the policy or reducing premium payments (if allowed).
  4. Consultation:
    Seek advice from a financial advisor or the post office staff to understand the implications fully before proceeding.

Summary of Key Rules

To summarize, here are the critical rules for surrendering a PLI policy:

  1. The policy must be at least three years old, and premiums must have been paid regularly for the past 36 months.
  2. Specific Postal Life Insurance policies, such as Anticipated Endowment Assurance, 10-year Rural PLI, and Children’s policies, are not eligible for surrender.
  3. The surrender value is calculated based on the premium payment history, policy duration, and accrued bonuses.
  4. The policy remains in force until the end of the month in which the surrender application is received.
  5. Approval is granted at local or higher levels, depending on the surrender value.
  6. Payment is typically credited to the policyholder’s POSB account or disbursed via cheque.

Conclusion

Surrendering a Postal Life Insurance policy is a structured process governed by specific rules and procedures. While it offers a way to access funds in times of need, it is essential to weigh the financial implications carefully. Understanding the eligibility criteria, surrender value calculation and approval process can help policyholders make informed decisions. Always consider alternatives and consult experts before proceeding with the surrender of a PLI policy.

For official and comprehensive details, refer to the relevant PLI guidelines or contact your nearest post office. Remember, surrendering a policy is usually a loss, so avoid it unless necessary.

By following this guide, you can navigate the surrender process smoothly while ensuring compliance with all rules and regulations.

Other Relates Articles

Leave a Comment