When should you and how to surrender LIC Policy?

When Ankur started his first job, on the advice of one of his colleagues he bought one LIC endowment plan. The basic purpose of buying that plan was to save tax and also some investment for long term.

Now after few years when he was reviewing his investments, he was not sure if he’s invested in the right product or not. His tax saving is being taken care of by his EPF contribution and Home loan premiums, thus, this policy does not contribute to any tax saving investments. Neither this policy suits him from Insurance perspective; since he feels that insurance cover is minuscule as compared to his requirement.

His confusion was from the Investment perspective angle. He was told at the time of investment that it would give him some guaranteed and safe returns and will make his money double on maturity. Now this statement is still in his mind, which is a reason for confusion that “Should he surrender LIC Policy or not?”

You also must have some Endowment policies with you, which actually are being serviced from Investment planning angle only. But are they worth continuing? Did you ever evaluate them, as to if they are actually serving the purpose and generating enough returns or expected to generate enough returns as per your expectations? Would surrendering the policy and investing the proceeds somewhere else be wiser or you should continue with the plan as it is, until maturity.

Let’s try and answer the question Should you surrender LIC Policy, by taking an example of LIC Jeevan Anand.

(Also Read: Is the claim settlement ratio really important while selecting life insurance policy?)

Mostly endowment plans work in a similar way. You invest a calculated premium which is based on your Age, sum assured and term opted for, and on maturity, you will get Sum Assured plus all vested simple reversionary bonus plus final additional bonus (If any). These bonuses depend on the performance of Corporation and distributed as per management’s discretion, and it’s not guaranteed.

While evaluating the policy, you need to have following details with you:

  1. Your policy Surrender value ( with all vested bonuses)
  2. Term left before maturity
  3. Expected maturity value of your product ( As per past bonuses)
  4. Alternate product where you’ll invest the surrender value
  5. Expected Returns from that product.

To Surrender LIC Policy or not – Let’s understand this with two real-life cases:

Gaurav (name changed) bought LIC Jeevan Anand for a Sum assured of Rs 400000, with an annual premium of Rs 27340. The policy was started in Sept 2013, till date he’s paid 3 premiums (Policy is in 3rd Year). Premium paying term is 18 years, and policy term is 61 years.

He wanted to review the Policy from an Investment perspective as he got a decent Life insurance cover from Term Plan. He wants to know if he surrender LIC policy or continues with it.

How to get LIC policy surrender value?

Lic policies (endowment) attains surrender value only after payment of at least 3 annual premiums. It comes in 2 forms – Guaranteed surrender value and Special Surrender value. Surrender value factors are mentioned in policy feature details which help in getting tentative Idea, but it’s better to have an exact calculation in place by asking for Surrender quote from the LIC Office.

As per LIC Jeevan Anand surrender value terms – “The policy may be surrendered after it has been in force for 3 years or more.  The guaranteed surrender value is 30% of the basic premiums paid excluding the first year’s premium. Any extra premium(s) paid and premium(s) towards Accident Benefit are also excluded. In practice, the Corporation will pay a Special Surrender Value – which is either equal to or more than the Guaranteed Surrender Value.”

Gaurav enquired about surrender quotes from LIC office, but he could not get any since the policy is yet to complete 3 years. Before 3 years, endowment plans don’t generate any surrender value. So we considered the value as ZERO for our analysis.

(Also Read: Tax implications when you discontinue life insurance policy)

How to calculate the maturity value of LIC Jeevan Anand?

As per the policy features, Survival benefit would be Sum assured together with an accrued bonus.

To get the expected maturity value of the plan, we used the bonus data as available on the insurer’s website. http://www.licindia.in/Customer-Services/Bonus-Information . As per these details, the bonus declared in LIC Jeevan Anand (for 18 years term policy) in past 3 years was in the range of 44-45 per thousand. Thus, what the policy has been earning in the form of the bonus was Rs 18000 per year, and it’s assumed that same will continue in future too.

This means on maturity what he can expect to get was Rs 400000 (Sum assured) + Rs 18000*18 (Simple Reversionary bonus for 18 years term). Total comes out to be Rs 724000.

By calculating the maturity amount with Premium payments, annual returns come out to be 3.92%.

surrender lic policy

Of course looking at annual returns, continuing the plan does not make sense, but still to decide on to surrender LIC policy, one needs to look at the alternative available and expected returns from the same.

In this case, there’s no surrender value available, so whatever has paid is a total loss at this moment. But forgetting that if Gaurav starts investing the annual premium in some Hybrid fund with the expectation of 10% per annum return, then after 15 years he’d be having Rs 9.55 lakh. Even @8% he will have Rs 8 lakh with him.

Equity Investments do have the potential to generate such returns, but one has to be ready for Short-term volatility.

So it makes more sense for Gaurav to forget Rs 82020 paid as premiums till date and divert the annual savings to a better product.

Case 2 – LIC Jeevan Anand

Annual Premium – Rs 3249

Sum Assured – Rs 100000

Premium Paid – 16

Premium paying term – 30 years

Policy Term – 80 years

Surrender value as per Surrender quote is Rs 36713/-. Total Premium paid till now is Rs 51984/-.

Expected maturity value at 48-49 per thousand bonus as per http://www.licindia.in/Customer-Services/Bonus-Information, comes out to be Rs 247000 ( Rs 1 lakh SA plus Rs 1.47 lakh Bonus). This brings the annual return to 5.47%

surrender LIC policy

Now again, if you look just at percentage return then you may feel that one should be out of such product. But we need to look at the other side too, as what if we surrender and invest the surrender value and future premiums in a product which is expected to generate 8-10% of the annual return.

In this case, if we invest Rs 36713 and future annual premiums of Rs 3249, somewhere for 14 years term then @10% maturity value would be Rs 239397/-, lesser than what is expected from the policy itself.

So in this case mathematically, surrendering the plan may not make much of difference.

Should you surrender LIC Policy?

They say buying life insurance contract is a long-term commitment and should not be looked at from short-term viewpoint. I totally agree with the statement and this is why buying the same and continuing the same needs to be supported by long-term requirements and inflation rate.

(Read: Were you sold what was told?)

“WHY” is very important to answer before getting into any policy. If it is for Insurance then it should be having decent insurance coverage, enough for your financial dependents in case any eventuality strikes. If the purpose is an investment, then the expected return should beat inflation and generate some positive real returns.

This needs to be considered every time you review your investments. Sometimes, you have every reason to buy that product in the beginning, but over a period of time, it may not fit into your overall requirement and financial plan. So rather than clinging to it with a point of view of losing money if surrendered, it needs to be reviewed in detail – feature wise and requirement wise.

Every product you have should fit into the Big picture and help you achieve your financial goals comfortably. LIC policies are something which one feels comfortable to continue with, but when in the review it looks like a complete waste of money, then it’s wise to surrender the same and move ahead with better suitable products.

How to Surrender LIC Policy?

  1. Visit the LIC Branch Office with the Policy bond. I have experienced that only the branch from where the policy was bought is to be visited for this purpose s no other branch will entertain this request.
  2. Ask for the surrender form or you may Download-LIC-Policy-Surrender-Form-No.5074 form from here. The formats keep on changing, so it is better to ask the form from the branch itself.
  3. To surrender LIC Policy you also have to submit the Photo ID proof like aadhar card or Pan card, along with a canceled cheque copy having your name printed on it.
  4. On completion of formalities, the money will be credited to your account in 7-10 days time.

Hope you find the article on surrender lic policy useful. Do share your comments and questions in the commenst section below.


    • We are really not sure about which policy are you referring to. First, we have to understand the product and then a holistic look at your finances is required to assess whether the product fits somewhere in the financial Structure or not, according to your financial goals and other requirements.

  1. If the policy term of lic endowment plan is 10 years and i surrender policy after 6 years then why i am getting money less than premium however i have invested my premium for 6 years by single payment.

  2. I have taken Jeevan Anand poliy in 2011 with Annual premium of 55k, Premium paying term =25 and Sum Assured =20 lac, IF i will surrender this poliy. What wil be the surrendered value?

    • The surrender value of the policy would depend upon the fund value accumulated and the bonus rates which are prevailing for this policy.
      Please visit your nearest LIC office or contact your LIC Agent and get the surrender quote to know the surrender value.

    • The surrender value of the policy would depend upon the fund value accumulated and the bonus rates which are prevailing for this policy.
      Please visit your nearest LIC office or contact your LIC Agent and get the surrender quote to know the surrender value.

  3. I have taken LIC policy “The Endowment Assurance Policy (Plan-14)”

    Start Date: 11/11/2006
    Maturity Date 11/11/2026
    Yearly Premium Rs 24718

    I stopped paying the premium after 11/05/2015 as realized it is not giving proper coverage. So took Term Insurance for 1 crore.

    Now i can see policy is Paid Up and was waiting for maturity date. Because of covid, i am in financial trouble and need to withdraw money.

    Any rough estimate how much money i will get.

    Total amount paid till now -> 210086
    Bonus, Guaranteed Addition₹ 1,78,500 (As per LIC website)

    Please help with your knowledge whether i will get money which i invested i.e. Rs 2 lakh 10 thousand

  4. I have a LIC policy with sum assured being 5 Lakhs and the term being 35 years (paying 6125/- quarterly) which I took in June 2011. My query is what if I surrender the policy after 10 years ie if I surrender in June 2021

  5. Hello
    I have an LIC Jeevan Saral(with profits) policy- Table-165, term 20 years starting from April 2012 with assured maturity sum of 1205550/. I have been paying all premiums without a single break till date. Total premium paid till now-( 60650×8=485200/.)Now I want to surrender this policy this year. Can you please help me to know what will be the value I will get back after surrender.

    • This is something you would be provided by the LIC Branch office or your LIC Agent. Please contact your LIC Agent or visit the nearest LIC office and get the surrender quote.

    • It depends upon the type of plan you have. It may be possible that some portion of the bonus in the accumulated surrender value if the policy document says so. Please visit your nearest LIC office or contact your LIC Agent for details.

  6. Sir isn’t the maturity value= Sum Assured + Revisionary Bonus + Final Bonus. For the above calculations of Endowment Plan you haven’t considered the Final Bonus, shouldn’t that also be factored in?

    • In the calculation, we have taken the bonus rates as shared on the LIC website at the time of writing this post. The final bonus figure is not fixed. It may or may not be received. If received then it would be an additional benefit and improve the IRR a bit.


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