What Is LIC Paid-Up Sum Assured?

Understanding the terms and conditions LIC paid up policy feature is vital to know what benefits and coverage you will still get even if you decide to stop paying premiums.

Paid-Up Sum Assured in LIC - An Overview

Think of a situation where you buy a life insurance policy and pay the premiums for some time but due to reasons unavoidable you stop paying the premiums. In such a case the policy remains active but becomes a paid-up policy. What this actually means is that you will still get insurance coverage but the amount you receive as death benefit or maturity benefit will be less than the original policy's sum assured.

However, there are certain terms and conditions for an LIC policy to become a paid-up policy. For starters there is a lock-in period which means that a policyholder needs to pay regular premiums for a minimum number of years. If a policyholder stops paying premiums before the lock-in period ends they do not get any sum assured after the policy ends. The lock-in period and other terms are based on the particular LIC policy you're purchasing.

How to Calculate Paid-Up Sum Assured in LIC?

The value of your paid-up sum assured depends mainly on three factors which are the original sum assured, the number of premiums paid and the original number of premiums that were supposed to be paid. The basic formula to calculate the paid-up sum assured in LIC is

Paid-Up Sum Assured = Original Sum Assured ✕ (Number of Premiums PaidTotal Number of Premiums Payable)

However, there may be other factors as well like for money back and special plans you will have to subtract any survival benefits already paid from the paid-up sum assured. Here’s a description of all these factors that impact the final paid-up value of an LIC policy.

• Original Sum Assured
  The insurance coverage amount you get if you pay premiums regularly for the entire policy term.

• Number of Premiums Paid
  The total number of premiums paid before you stopped paying. This means the number of premiums paid before policy got the paid-up policy status.

• Policy Term
  The total duration of the policy and the period for which premiums were originally payable.

• Policy Type
  LIC has different types of plans like endowment, whole life, or money-back policies. The calculation of the paid-up sum assured can differ across these plans. The calculation formula and all the terms will be mentioned in your policy documents.

For example you have an LIC policy with an original sum assured of ₹10 lakh and have paid premiums for 15 years out of a 20-year policy term. In that case, the Paid-Up Sum Assured will be ₹10 lakh multiplied by the ratio of 15 and 20 which results to ₹7,50,000. However, as per your policy if there are any deductions needed then they will be subtracted from this amount.

Why is Paid-Up Sum Assured Important?

When you decide to buy a term insurance policy or any other life insurance plan, you do not know what the future holds and if you will be able to even pay the premiums throughout the policy term or not. Therefore, it becomes important to understand the terms and conditions of a paid-up LIC policy so that you know what you'll get from your policy once you stop paying premiums.

For instance, you have purchased a 20 year LIC plan and after 20 months you decide to stop paying the premiums. If 20 months premium payment term is less than the lock in period required for your policy to become paid-up, then you will not receive any benefits. However, for example the lock-in period is 24 months. So now you know that if you somehow pay premiums for 4 more months then you will receive your insurance coverage. Although the coverage will be less than the original sum assured but you will still get some benefit.

Therefore, the Paid-Up Sum Assured provides flexibility if you can no longer afford to continue premium payments. Even though the benefits are reduced a paid-up policy still offers protection and can be beneficial if you need to ensure some level of insurance coverage.

Knowing in advance about the Paid-Up Sum Assured and how it will be calculated helps in understanding how your policy will function if you decide to stop paying premiums and ensures that you’re not caught off guard by reduced benefits.

What are the Advantages of Paid-Up Sum Assured in LIC?

You must think what advantages will there be when benefits are reduced in a paid-up policy. It is important to understand that the benefits are reduced only because you do not pay for the entire policy term. However, you get benefits in accordance with the number of premiums you pay. Following are these benefits explained.

• No Further Premium Payments: Once your policy becomes paid-up you are relieved from making further premium payments while still retaining a degree of coverage.

• Insurance Coverage: Although the benefits are reduced you still receive some payout whether at maturity or in case of an insured event like death.

• Surrender Value: A paid-up policy often accumulates a surrender value which can be beneficial if you decide to terminate the policy before maturity. You can use the LIC Surrender Value Calculator to estimate the amount you will receive in case you surrender your policy before maturity.

Read about the LIC Jeevan Labh Paid-Up Value Calculator

Wrapping It Up

LIC paid up sum assured is the reduced insurance coverage amount a policyholder gets when they stop paying premiums after a while but only if they have crossed the lock-in period for their policy. It is important to understand the rules that govern a paid up LIC policy and how the sum assured is calculated. This is because it tells them when their policy is eligible to become a paid up policy and helps them estimate the value of their insurance if they can no longer pay premiums. Knowing such details about their policy will help them manage their finances accordingly. If you are unsure about the impact of making your policy paid up then it is best to check your policy terms or speak with your LIC agent or financial advisor before making a decision.

LIC Resources

FAQs