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Have a LIC policy and how to convert to paid up?

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16 Feb, 2022 by  Deepak

Hi Team,


I have a LIC policy which has half yealy premium. After payment of 7 premiums am trying to convert the policy to paid up. I have read somewhere if you have paid for atleast 3 years and stopped paying the premium, it auto convert to paid up.


Need a confirmation regarding the same.

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17 Feb, 2022
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Hi,


The policy would be in paid up after premium payment of 3 yrs however all the benefits that would be accrued in the policy would be ceased and only surrender value would be applicable.



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17 Feb, 2022
Chartered Accountant, Personal Finance Advisor

Hi Deepak,


What you have read is correct, in case of endowment and other traditional savings plans issued by LIC would be converted to reduced paid up policy after premium for 3 full years are paid. This would result in the sum assured and the maturity amount getting reduced. In case you have an adequate term life cover you can go for surrender of policy instead of just discontinuing the premium payment resulting in reduced paid up policy.

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17 Feb, 2022
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Hi Deepak,


It is important to know the concept of paid-up value first. As per IRDA "after premiums are paid for a certain defined period or beyond and if subsequent premiums are not paid, the sum assured is reduced to a proportionate sum, which bears the same ratio to the full sum assured as the number of premiums actually paid bears to the total number originally stipulated in the policy".


Paid up Value = (No. of Premiums Paid / No. of Premiums Payable) X Sum Assured + Bonus (if applicable).


You are right in your understanding, in most of the Conventional Life Insurance, after 3 years of premium payments, a policy becomes paid-up if the future premiums are not paid by the policyholder.



Thanks.

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