How to Check Surrender Value of LIC Policies?

Life Insurance is a contract between the person who is an insurer and a policyholder. It is generally recommended to continue with insurance plans. However, thanks to existing unforeseen situations leading to the layoffs, pay cuts across, and eventually surrenders pressure. People believe that if they surrender their regular policies and invest that amount in equity funds, they can get a chance to earn some income despite the premium loss.

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LIC offers different life insurance policy plans. These plans come with a range of policy terms so that an individual can choose a life cover plan as per their requirement. Once a term is chosen, the policy runs for the given period of the term providing life cover benefits. However, what if someone wants to end his or her LIC policy plan before the term ends? How can it be done?

People can end their policy plan before the term ends. The process is called surrendering of the policy plans. Let us understand the meaning of surrender value and how to perform different surrender value’s calculations.

What do you Understand by Surrender Value?

Surrendering any policy under LIC implies that the insurer will get back a part of the money he paid as a premium, although after deduction of charges before completing its full term. Surrender value is the sum/ amount payable to the insurer when deciding to stop the policy and embody the same from LIC.

The value is payable only after three full years of premiums are paid to LIC. The policyholder can opt to surrender his policy anytime he wants to. After the policy has been surrendered, the company pays the surrender value leading to termination of coverage.

Additionally, the corporation pays a special surrender value that is either equal to or more than the guaranteed surrender value.

LIC Policy Surrender

An individual can surrender such policies as ULIPs, endowment, etc., which offer both insurance and investment. It should be kept in mind that if you surrender term plans, which have no maturity, benefits would lead to a lapse in policy.

The following happens when the policy is surrendered:

  • The surrendered value is paid to the insurer.
  • The coverage stops 
  • There is no scope for policy revival in the future.
  • All the benefits applicable to the policy cease to apply.

Demerits of Surrendering

It is generally advisable not to surrender a LIC’s policy. However, if LIC’s policyholder is not able to take care of the policy premium due to unexpected circumstances or financial issues, he can surrender the same and move ahead with a better perspective.

Some disadvantages of Policy Surrender are: 

  • Since the sole purpose of a person, investing in LIC policy or any kind of policy is that he wants to secure the financial aspects of his family in the future. When the individual surrenders their LIC policy, the purpose is defeated as the life cover factor is no longer available.
  • Now, suppose a person wants to surrender their LIC policy before the completion of 3 years because of underlying reasons. The surrendered value will become zero as earlier said that the surrendered value is applicable only after three full years of premiums paid.
  • Let us say the person has surrendered a specific policy. Still, after a few years, he wishes to invest in the same policy again, so he would have to pay an increased premium amount unnecessarily. This happens because of the increase in the person's age, which subsequently leads to more risks.
  • Depending on the terms and conditions applicable to any LIC policy, acquired bonuses are given. Since now a person has surrendered his policy, he would not be getting those benefits and only receive a small part of the amount he paid as premiums.

Different Types of Surrender Value

Two different Surrender Value types are there:

  • Guaranteed Surrender Value and 
  •  Special Surrender Value

Guaranteed Surrender Value

Under Guaranteed surrender value, if an insurer wants to end the policy before the policy's maturity, he/she is paid with a specific amount called the Guaranteed Surrender Value. 

According to the LIC brochure: 

 Guaranteed Surrender Value = 30% X Total premiums paid. 

The first-year premiums and all the added premiums or premiums for accident benefit or the term rider are excluded from the same. 

The percentage to be paid may depend on the policy plan and the year in which an individual will surrender the policy. The percentage is usually called the surrender value factor, which is directly proportional to policy norms. This also implies that the percentage to be paid will be gradually increased as the policy approaches maturity.

How to Calculate Guaranteed Surrender Value?

Take an example; let us say Harish has bought a LIC’S Jeevan Amar plan. The period of the policy is 20 years. He has to pay an amount of INR 35,000 inclusive taxes annually. Let us say after the third year, he wishes to surrender his policy. Now since he is supposed to get some money, i.e., Guaranteed Surrender Value. It can be calculated as;


 Percentage/surrender value factor *(initial amount*number of years he invested in)

                     = 30 %*( 35,000*3)

                                                  = INR 31,500

  • Percentage/ surrender value factor= 30%

Now, if Harish also has to get some vested bonuses, then surrender value for vested bonuses will be calculated as,

A vested bonus is a bonus that has to be paid to an insurer at the time of maturity of his/ her policy. Suppose the bonus value for Harish’s policy is INR 65,000. Assume the percentage or surrender value factor for any accumulated bonuses like 18%. The surrender value can be calculated as;

The surrender value = percentage/surrender value factor (18%)*(accumulated bonuses)                                                                  

                                                                   = 18 %*( 65,000)

                                                                   = INR 11,700

Special Surrender Value

Suppose an individual wish to discontinue the policy. In that case, the amount he will get will be either equal or greater than the guaranteed surrender value and is called the Special Surrender Value.

Special surrender value is calculated by multiplying paid-up amount, bonus (if any), and surrender value factor. 


{(Sum*Number of installments) +bonuses (if any)}*surrender value factor/percentage.

How to Calculate Special Surrender Value?

Let us take an example; Aria has invested in the LIC’s New Jeevan Anand policy plan for 15 years for the guaranteed sum of INR 15, 00,000. Now say, she has to pay an amount of INR 50,000 annually, which she will pay for three years. Suppose in the fourth year, she wishes to surrender her New Jeevan Anand policy due to some reasons.

The special surrender value can be calculated:

Special surrender value= {(15, 00,000*(4/15) +40000}*40%

                                       =INR 176,000

Assume percentage/surrender value factor is 40%

Assume bonus collected is INR 40,000

With the steps shown in both the cases above, you can now quickly calculate the value of your surrender value. One should always know what they want, what they buy, and compare with other financial products for returns. You can take the help of a planner to understand the whole policy and its surrender penalty clause.

Surrender Value Factor

The surrender value factor is the percentage value of the paid-up value of the policy with a bonus. For the first three years of the policy plan, it is generally zero. This value keeps rising from the third year itself. It depends on company to companyandvarious other factors. 

Many companies use various methods to calculate the Surrender Value factor. A company can calculate the surrender value factor using factors like the type of policy, maturity time, completed policy years, and profit fund performance in the case of the policies which participate. Not every insurance company will declare its Surrender Value factor in the product brochure or on its website. One can get the information directly from the insurer or the agent.

LIC Surrender Value Calculator

As you have seen, LIC policies can be surrendered anytime. For this, Surrender Value calculators are published to give an individual a fair estimate of his/her policy surrender value. One has to provide some information regarding your policy, and Voila, the calculator, gives you a rough estimate of surrender value. 

How to use the LIC Surrender Value Calculator?

LIC Surrender value calculator can easily be used online on any insurance company firm. Individual just has to provide some basic information as to his name, phone number, type of plan, term period, number of installments, payment mode, and premium to be paid, and the duration the policy has completed. Once he enters all these details, the calculator provides him with the rough surrender value. 

This is the easy and instant way of calculating any LIC's surrender value. But one should also understand that by surrendering your policy, you will become devoid of any life cover. So check each factor before preceding the same.

How to Surrender LIC Policy?

One needs to follow the steps below to surrender LIC policy:

Step 1:Visit the LIC Branch workplace with the Policy bond. For that, solely the branch from wherever the policy was bought is to be visited. No alternative branch can entertain the request.

Step 2:Ask for the surrendering type; otherwise, one might Download-LIC-Policy-Surrender-Form type from the LIC website. The formats keep changing, so it is better to ask for the form from the branch itself.

Step 3:To surrender LIC Policy, one might submit the ID proof like an AADHAAR card or PAN Card, at the side of a cancelled cheque copy having your name written thereon.

Step 4:On completion of formalities, the cash will be attributable to your account in 7-10 days.

Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.

*The investment risk in the investment portfolio is borne by the policyholder.

**All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C apply.

Written By: PolicyBazaar - Updated: 02 November 2021
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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