Archive · 27 Aug 2026
NCDRC Upholds LIC Policy Surrender After Loan Default
Amar Singh used his life insurance policy to help secure a bank loan.
He formally assigned control of the policy to IDBI Bank in 2007.
Singh did not repay the loan, so the bank told LIC to surrender the policy.
LIC surrendered it in 2011 and sent ₹2,26,325 to the bank.
Singh argued that LIC should not have done this without his permission.
The National Consumer Disputes Redressal Commission said LIC had followed the rules because the bank was the official assignee.
However, the bank said the money stayed in a suspense account after Singh closed his accounts.
The commission ordered the bank to give the money, with accrued interest, to Singh.
Amar Singh assigned his LIC policy to IDBI Bank as security for a ₹79,000 credit limit.
LIC surrendered the policy in 2011 for ₹2,26,325 on the bank’s instructions after the loan remained unpaid.
The NCDRC found no deficiency of service by LIC because the bank was the policy’s assignee.
The commission ruled that LIC did not need Singh’s separate consent or notice before acting on the assignment.
IDBI Bank was ordered to release ₹2,26,325 and accrued interest to Singh within one month.
- Who
- Amar Singh, Life Insurance Corporation of India (LIC), and IDBI Bank were involved; the NCDRC decided the dispute.
- What
- The NCDRC upheld LIC’s surrender of Singh’s assigned policy after loan default, while ordering IDBI Bank to release the surrender proceeds to Singh.
- When
- Singh bought the policy on December 28, 2001; assigned it on December 6, 2007; LIC surrendered it on October 5, 2011; and the NCDRC order was dated August 2, 2026.
- Where
- The dispute originated in Kharkhoda, Sonepat, Haryana, and proceeded through consumer commissions including the NCDRC.
- Why
- The policy had been assigned to IDBI Bank as loan security, and the bank instructed LIC to surrender it because the loan remained unpaid.
Policyholder’s Position
LIC and Bank’s Position
Consent before surrender
Policyholder’s Position
Singh argued that LIC surrendered the policy without his consent or request and sought restoration.
LIC and Bank’s Position
LIC and the commissions held that the bank, as the duly appointed assignee, controlled the policy and could instruct LIC to surrender it.
Nature of the policy termination
Policyholder’s Position
Singh’s counsel referred to LIC’s campaign for reviving lapsed policies and cited a later bank letter saying it had no objection to continuation.
LIC and Bank’s Position
LIC argued that this was not a lapsed-policy matter; the policy had been surrendered by the assignee because the loan remained unpaid.
Responsibility for the proceeds
Policyholder’s Position
Singh sought restoration and later became entitled to receive the surrender proceeds held by the bank.
LIC and Bank’s Position
The NCDRC found no service deficiency by LIC but directed IDBI Bank to release the money and accrued interest to Singh.
- Policy sum assured
- ₹5 lakh
- Policy maturity date
- December 8, 2026
- Credit limit
- ₹79,000 from IDBI Bank
- Policy assignment date
- December 6, 2007
- Surrender amount
- ₹2,26,325
- LIC surrender date
- October 5, 2011
- NCDRC direction
- IDBI Bank must release ₹2,26,325 plus accrued interest within one month; delay attracts 6% annual interest.