Note: This calculator provides estimates based on standard LIC surrender value rules. Actual surrender value may vary based on specific policy terms and conditions. For exact values, please contact LIC customer service or your agent.
When you consider surrendering your Life Insurance Corporation (LIC) policy, understanding its surrender value becomes crucial. This comprehensive guide explains how surrender values are calculated, factors affecting them, and alternatives to consider before making this important financial decision.
The surrender value represents the amount LIC will pay if you decide to terminate your life insurance policy before its maturity date. It's essentially the cash value you receive when you voluntarily cancel your coverage. This value typically becomes available after you've paid premiums for at least three consecutive years.
There are two types of surrender values:
Our calculator helps estimate what you might receive if you surrender your LIC policy. Follow these steps:
Several elements influence how much you'll receive when surrendering your policy:
The longer you've held the policy, the higher the surrender value tends to be. Most policies don't accumulate any surrender value in the first three years.
Total premiums paid directly affect your surrender value calculation. Higher premiums generally lead to higher surrender values.
Endowment plans typically have better surrender values than term plans. ULIPs have separate surrender value calculations based on fund performance.
If your policy has accrued bonuses, these are added to the surrender value after certain years of premium payment.
Surrendering a life insurance policy is a significant financial decision that should be carefully considered. Here are situations where it might make sense:
Before surrendering, consider these options that might better serve your financial needs:
Most LIC policies allow borrowing against the policy's cash value, typically up to 90% of the surrender value.
Stop paying premiums but maintain a reduced sum assured based on premiums already paid.
Some policies allow redirecting premiums to more suitable products within LIC's portfolio.
In certain cases, you might get better value by selling your policy to a third party.
LIC calculates surrender value based on several factors: the type of policy, number of premiums paid, sum assured, and accrued bonuses. Typically, the guaranteed surrender value is 30% of premiums paid (excluding first year and rider premiums). Special surrender value may be higher and includes bonuses after certain years.
Most LIC policies don't offer any surrender value if discontinued within the first three years. After three full years of premium payments, the policy acquires a surrender value that increases with each additional year of premium payment.
No, pure term insurance plans typically don't have any surrender value. Endowment, money back, whole life, and ULIP plans generally do accumulate surrender value after the initial lock-in period.
The amount varies based on your policy type, sum assured, and premiums paid. For a typical endowment policy, after 5 years you might receive approximately 30-50% of your total premiums paid (excluding first year) plus any accrued bonuses. Use our calculator for a more accurate estimate.
Surrendering should be a last resort as you typically receive less than the total premiums paid and lose life coverage. Consider alternatives like policy loans or making the policy paid-up. Evaluate your financial needs, policy performance, and tax implications before deciding.
After submitting all required documents, it typically takes 15-30 working days to receive the surrender value payment. Processing time may vary depending on branch workload and completeness of your surrender application.
You'll need: 1) Original policy document, 2) Surrender form (Form 5074), 3) ID proof, 4) Address proof, 5) Bank account details, 6) Cancelled cheque, and 7) NRI documents if applicable. Some cases may require additional documents.
Surrender value is tax-free if received after completing 5 policy years. For surrenders within 5 years, the amount exceeding total premiums paid is taxable as income. Always consult a tax advisor for your specific situation.
Currently, LIC doesn't offer complete online surrender. You can download forms online but need to visit a branch with original documents to complete the surrender process. Some policy types may allow partial withdrawals online.
Surrender value is what you receive for terminating the policy early, typically much lower than maturity value. Maturity value is paid when the policy completes its full term and includes sum assured plus all bonuses, often significantly higher than total premiums paid.
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