How to Calculate the Surrender Value of an LIC Policy

To use the value nicely, you should know how to calculate surrender value of LIC policy, and how to check LIC policy surrender status online. We will go step by step, so you understand all the parts.

What Does “Surrendering LIC Policy” Mean?

When someone buys an LIC policy, they agree to pay money (premiums) for many years. But sometimes, life changes, and they decide to stop before it finishes. That act of stopping early is called surrendering the policy. When they surrender, all the insurance benefits stop. In return, LIC gives them a surrender value, some money back, if certain conditions are met.

But a policy only offers a surrender value after at least 3 years of paying premiums. If you surrender sooner than that, usually you don’t get anything.

Importance of Knowing Your LIC Policy Surrender Value Before Surrendering

Before you decide to cancel your LIC policy via surrender, it’s crucial to understand the implications. Being aware of the surrender value helps you make an informed decision and avoid financial surprises.

1. Avoid Unexpected Losses

Most LIC policies only acquire a surrender value after at least 2–3 years of premium payments. If you surrender too early:

• You may receive a very low payout or even nothing at all.
• Understanding the surrender value beforehand prevents losses due to premature cancellation.

2. Understand the True Worth of Your Policy

By calculating the LIC policy surrender value —

• You can estimate the amount you will receive if you exit now.
• This gives a clear picture of what you are giving up, including potential bonuses and maturity benefits.
• It ensures that you do not make hasty decisions without knowing the financial impact.

3. Compare Short-Term Needs vs. Long-Term Gains

Surrendering a policy may provide immediate cash, but it comes at the cost of long-term benefits —

• Maturity payouts
• Accrued bonuses
• Life coverage benefits

Carefully comparing your current financial requirements with the future value of your policy helps determine if surrendering is the right choice.

4. Explore Better Alternatives

If the calculated surrender value is low —

• Consider policy loans or partial withdrawals instead of full surrender.
• This allows you to meet urgent financial needs while keeping your insurance active.
• Preserves long-term growth and benefits of the policy.

Types of Surrender in LIC Policy

There are different ways surrender can happen —

• Full Surrender: You cancel the policy completely and ask LIC to pay you the surrender amount. After that, the policy is gone forever.
• Special Surrender: In some exceptional cases (for example, serious financial trouble or illness), LIC may allow you to surrender with lower charges or more favourable terms.
• Surrender by Non-payment of Premiums: If you stop paying premiums and the policy lapses, it may be treated like a surrender. If the policy has already earned surrender value, you may be eligible to receive it then.

How to Surrender a LIC Policy (Offline and Online)?

Offline Method

1. Visit your nearest LIC branch.
2. Ask for Form 5074 (Surrender Discharge Voucher).\
3. Fill it in, attach documents (original policy bond, ID proof, PAN, cancelled cheque, etc.).
4. Submit it and wait. LIC verifies your request.
5. If approved, the surrender value is paid into your bank account.

Online Method

1. Go to LIC’s official portal and log in (or register).
2. Download Form 5074 from the site.
3. Fill it and upload the required documents.
4. Submit it through the portal.
5. LIC processes it, and the surrender value is transferred to your registered bank account.

Doing this online is convenient, and it helps you see how to check LIC policy surrender status online too.

How to Calculate the Surrender Value of LIC Policy

To find out how much you’ll get, LIC uses a formula (it’s not one simple number for everyone). You need —

• Basic sum assured
• Number of premiums paid / total premiums payable
• Bonuses (if any) earned during policy
• Surrender value factor (a percentage, depending on policy rules)

A simplified form: (Basic sum assured + proportion of total premiums paid + total bonuses) × surrender factor (X)

Because factor X depends on the policy type, surrender year, and rules, you can’t always know exactly without checking the LIC rules or using an LIC surrender value calculator.

How to Check LIC Policy Surrender Value Online?

If you want to see your surrender value or status online —

1. Visit the LIC website
2. Log in (or register if you are new)
3. Once logged in, go to “Enrol Policies” or “My Policies”
4. Enter your policy number, name, premium amount, etc
5. After your policy is enrolled, click on “Loan and Bonus / Details”
6. You should see the surrender value info there

This is exactly how you check the surrender value of LIC policy online using your policy number and user login.

Documents Needed to Surrender LIC Policy

When you apply to surrender (offline or online), you usually need —

• Form 5074 (Surrender Discharge Voucher)
• Original policy bond
• Proof of identity (PAN, Aadhar, etc.)
• Cancelled cheque/bank account details
• NEFT / bank mandate form, if needed

Make sure all information is correct so the LIC can approve quicker.

What Happens After You Surrender a Policy?

When you surrender your LIC policy —

• The coverage ends immediately, no more life protection.
• You get the surrender value (if eligible).
• The policy becomes void; it cannot be revived later.
• You lose all benefits, bonuses, and tax advantages for NRIs linked to that policy.

Because it’s a big decision, many people prefer alternatives like paid-up policy or partial withdrawals rather than full surrender.

Example to Understand Surrender Value

Suppose you have an LIC endowment plan of AED 2,00,000 sum assured over 15 years. You paid premiums for 4 years, and there’s a bonus of AED 4,000. Let’s say the surrender factor used is 40%.

Using a special surrender formula:

Special surrender = (2,00,000 × (4/15) + 4,000) × 40%

Step 1: Calculate (2,00,000 × (4/15))
= 2,00,000 × 0.266666...
= 53,333.33

Step 2: Add 4,000
53,333.33 + 4,000 = 57,333.33

Step 3: Multiply by 40% (or 0.4)
57,333.33 × 0.4 = 22,933.33

Special Surrender Value = AED 22,933 (approximately)

This gives a rough idea of how surrender value might be computed for your policy.

Factors That Affect Surrender Value

The amount you’ll receive depends on several things —

• Type of policy: Some policies (like term plans) don’t have surrender value.
• Policy duration: Surrendering early yields a lower value; value increases as the policy matures.
• Total premiums paid: More paid-in money usually means a higher surrender value.
• Bonus/rider benefits: You receive additional benefits and bonuses that can enhance the policy's value, if permitted.
• Policy terms: Surrender value factor, waiting periods, and other conditions set by LIC.
• Market conditions (for ULIPs): If your policy has investment elements, market performance affects the surrender value.

Benefits of Using an LIC Surrender Value Calculator

Here’s how using a surrender value calculator makes the decision-making process quicker, simpler, and more accurate —

1. Quick and Accurate Estimates

• Enter your policy details such as term, premium amount, duration, and bonuses.
• Get an instant estimate of the LIC surrender value.
• Helps in financial planning without manually calculating complex formulas.

2. Easy to Use — No Expert Knowledge Needed

• Beginner-friendly interface suitable for everyone, tech-savvy or not.
• Requires only basic inputs to generate reliable results.
• Makes policy evaluation straightforward and accessible to all policyholders.

3. Provides a Complete Policy Illustration

• The calculator provides a detailed breakdown:
  • Surrender value
  • Accrued bonuses
  • Maturity benefits
• Empowers you with clarity on policy worth and helps make informed decisions about surrender or alternative options.

Conclusion

Surrendering an LIC policy is a big decision because you lose future benefits, but sometimes it’s necessary. By understanding how to calculate surrender value of LIC policy, how to check LIC surrender value online by policy number, and knowing the documents and process, you make an informed choice. Always try to balance your present needs and future security before surrendering.

Frequently Asked Questions