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The surrender value of a LIC insurance policy is the amount that the policyholder will receive if they decide to terminate the policy before its maturity date. After 10 years of paying premiums, most life insurance policies start to acquire a surrender value. The LIC surrender value after 10 years of premium payment can be calculated based on the pending premium payments, attached bonuses, and the surrender value factor.
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LIC surrender value is the amount a policyholder receives if they decide to terminate or surrender their life insurance policy before its maturity date. Surrendering a policy means the policyholder stops paying premiums and gives up the insurance coverage provided by the policy. As a result, the policyholder is entitled to receive the surrender value, which is a portion of the total premiums paid, after accounting for various deductions and charges. Some of the standard deductions that are considered while calculating the surrender value include:
Surrender Charges
Policy Administration Charges
Mortality Charges
Premium Allocation Charges
Service Tax and GST
If you want to calculate how much money you can encash from your policy after surrendering it, you should know certain important aspects of LIC’s surrender value benefit.
To surrender an LIC policy after 10 years, you should have paid premiums for a minimum of 3 years. Only then can you claim any surrender benefit.
The more premiums you have paid, the more money you will return.
Bonuses also acquire a surrender value.
LIC declares surrender value factors as per the policy term and the policy year in which you are surrendering it.
Surrender value factors are separate for premiums paid and bonuses accrued.
Surrender value does not include the 1 year’s premium, premiums paid for riders and taxes.
When you surrender a LIC policy, you receive a surrender value from the company. The surrender value is the amount that LIC pays you when you terminate your policy prematurely. The exact amount you receive depends on several factors, including the type of policy, the number of premiums paid, the policy's duration, and whether it is eligible for any bonuses.
There are two types of surrender values associated with LIC policies:
Guaranteed Surrender Value (GSV): The GSV is the minimum amount that LIC is legally obligated to pay you if you choose to surrender your policy. It is calculated based on your paid premiums and the policy's duration. Typically, GSV becomes applicable after you have paid premiums for at least two or three years, depending on the policy terms.
Special Surrender Value (SSV): LIC offers a more flexible and dynamic SSV that considers the policy's duration, the sum assured, and any bonuses attached to the policy. SSV tends to be higher than GSV, especially if the policy has been in force for longer and accrued bonuses.
The surrender value you receive will be either the GSV or the SSV, whichever is higher. In most cases, the SSV is applicable after a certain number of policy years and is typically higher than the GSV. You can also check the surrender value of LIC policies before proceeding and make an informed decision.
**Term insurance may be better for individuals prioritizing financial protection over surrender benefits. Term plans focus solely on providing high-life coverage at lower premiums without offering surrender value.
Surrender value calculation is very simple.
Guaranteed Surrender Value is equal to - (total premium paid multiplied by the guaranteed surrender value factor) plus (bonus multiplied by surrender value factor for bonus).
Special Surrender Value is equal to - (Original sum assured multiplied by (number of premiums paid / number of premium payable) + total bonus received) * surrender value factor
All the above information is in the brochure or policy document. All you have to do is place the numbers in these formulae.
Let us assume that you bought LIC’s New Jeevan Anand policy. Here are your requirements -
Policy term - 20 years
Sum assured - Rs. 10,00,000
Using the LIC Premium & Maturity Calculator, annual premium - Rs. 54,869
Bonus Rate - Rs. 50 per Rs. 1000 of the sum assured
Now, you decide to surrender the policy in the 11th year. Therefore -
The total premiums paid are equal to Rs. 5,48,690.
Total bonus accrued = ((50 x 10,00,000/1,000) x 10) equals Rs. 5,00,000.
The guaranteed surrender value factor for a policy term of 20 years and policy surrender in the 11th year is 60% (as mentioned in LIC New Jeevan Anand’s brochure).
The guaranteed surrender value factor for bonuses is 18.6%.
Putting the above data in the formula for calculating the LIC guaranteed Surrender Value after 10 Years, we get (5,48,690 multiplied by 60%) plus (5,00,000 multiplied by 18.6%), which is equal to Rs. 4,22,214.
This is the LIC surrender value you will receive if you surrender your policy after 10 years.
Calculating the LIC surrender value after 10 years involves various factors, including the type of policy, premiums paid, policy duration, bonuses, and surrender charges. It's important to understand the terms and conditions of your specific LIC policy to make an informed decision. Before deciding to surrender your LIC policy, assess the financial impact and explore alternative options, such as taking a loan against the policy or converting it into a paid-up policy.
Note: Check all the best term insurance plan in India.
Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.
˜Top 5 plans based on annualized premium for bookings made on https://www.policybazaar.com in the first 6 months of FY 24-25.
Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
+Rs. 487/month (Rs.16/day) is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 38 years of age.
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