LIC / Policy Surrender vs Mutual Fund Calculator

Calculate Guaranteed Surrender Value (GSV), Special Surrender Value (SSV), policy IRR, and break-even wealth if reinvested in Mutual Funds.

Policy & Investment Parameters

1-Click Presets:

Annual Premium Paid (₹)

₹

₹10,000₹5.00 L

Total Policy Term (Years)

535

Premium Paying Term (Years)

520

Number of Years Premiums Paid

016

Sum Assured / Life Cover (₹)

₹

₹1.00 L₹50.00 L

Expected Bonus Rate (₹ per ₹1,000 SA / Year)

2560

Expected Mutual Fund CAGR (%)

8%16%

Estimated Surrender Value Today: ₹2.01 L; Total Premiums Paid: ₹4.00 L(-₹1.99 L haircut)

Higher of GSV/SSV

Continue Policy Maturity: ₹27.15 L; IRR: ~4.2% p.a.
Surrender + MF Reinvest: ₹54.56 L; CAGR: 12% p.a.

Net Wealth Difference at Maturity:: +₹27.40 L; Reinvesting the surrender cash plus saved future premiums into 12% mutual funds beats the endowment payout by ₹27,40,386.

Surrender & Reinvest in Equity/Index Mutual Funds

Surrendering for ₹2,00,640 and investing it plus the future premiums at 12% a year ends at ₹54,55,586 at maturity — ₹27,40,386 more than continuing the policy.

Year-by-Year Wealth Trajectory Comparison

Track how equity mutual fund compounding overcomes the initial policy surrender haircut.

Break-Even: Year 8

Show as

Year 5
Cumulative Premium
₹5.00 L
Option A: Policy Value
₹8.36 L
Option B: Surrender + MF
₹3.31 L
Option C: Paid-Up + SIP
₹5.41 L
Year 6
Cumulative Premium
₹6.00 L
Option A: Policy Value
₹10.03 L
Option B: Surrender + MF
₹4.79 L
Option C: Paid-Up + SIP
₹6.62 L
Year 7
Cumulative Premium
₹7.00 L
Option A: Policy Value
₹11.70 L
Option B: Surrender + MF
₹6.44 L
Option C: Paid-Up + SIP
₹7.97 L
Year 8
Cumulative Premium
₹8.00 L
Option A: Policy Value
₹13.38 L
Option B: Surrender + MF
₹8.31 L
Option C: Paid-Up + SIP
₹9.50 L
Year 9
Cumulative Premium
₹9.00 L
Option A: Policy Value
₹15.05 L
Option B: Surrender + MF
₹10.41 L
Option C: Paid-Up + SIP
₹11.22 L
Year 10
Cumulative Premium
₹10.00 L
Option A: Policy Value
₹16.72 L
Option B: Surrender + MF
₹12.77 L
Option C: Paid-Up + SIP
₹13.16 L
Year 11
Cumulative Premium
₹11.00 L
Option A: Policy Value
₹18.39 L
Option B: Surrender + MF
₹15.43 L
Option C: Paid-Up + SIP
₹15.35 L
Year 12
Cumulative Premium
₹12.00 L
Option A: Policy Value
₹20.06 L
Option B: Surrender + MF
₹18.43 L
Option C: Paid-Up + SIP
₹17.81 L
Year 13
Cumulative Premium
₹13.00 L
Option A: Policy Value
₹21.74 L
Option B: Surrender + MF
₹21.80 L
Option C: Paid-Up + SIP
₹20.58 L
Year 14
Cumulative Premium
₹14.00 L
Option A: Policy Value
₹23.41 L
Option B: Surrender + MF
₹25.59 L
Option C: Paid-Up + SIP
₹23.71 L
Year 15
Cumulative Premium
₹15.00 L
Option A: Policy Value
₹25.08 L
Option B: Surrender + MF
₹29.86 L
Option C: Paid-Up + SIP
₹27.23 L
Year 16
Cumulative Premium
₹16.00 L
Option A: Policy Value
₹26.75 L
Option B: Surrender + MF
₹34.67 L
Option C: Paid-Up + SIP
₹31.20 L
Year 17
Cumulative Premium
₹16.00 L
Option A: Policy Value
₹28.42 L
Option B: Surrender + MF
₹38.83 L
Option C: Paid-Up + SIP
₹34.42 L
Year 18
Cumulative Premium
₹16.00 L
Option A: Policy Value
₹30.10 L
Option B: Surrender + MF
₹43.49 L
Option C: Paid-Up + SIP
₹38.03 L
Year 19
Cumulative Premium
₹16.00 L
Option A: Policy Value
₹31.77 L
Option B: Surrender + MF
₹48.71 L
Option C: Paid-Up + SIP
₹42.08 L
Year 20Maturity
Cumulative Premium
₹16.00 L
Option A: Policy Value
₹27.15 L
Option B: Surrender + MF
₹54.56 L
Option C: Paid-Up + SIP
₹48.94 L

Policy Year	Cumulative Premium	Option A: Policy Value	Option B: Surrender + MF	Option C: Paid-Up + SIP
Year 5	₹5.00 L	₹8.36 L	₹3.31 L	₹5.41 L
Year 6	₹6.00 L	₹10.03 L	₹4.79 L	₹6.62 L
Year 7	₹7.00 L	₹11.70 L	₹6.44 L	₹7.97 L
Year 8	₹8.00 L	₹13.38 L	₹8.31 L	₹9.50 L
Year 9	₹9.00 L	₹15.05 L	₹10.41 L	₹11.22 L
Year 10	₹10.00 L	₹16.72 L	₹12.77 L	₹13.16 L
Year 11	₹11.00 L	₹18.39 L	₹15.43 L	₹15.35 L
Year 12	₹12.00 L	₹20.06 L	₹18.43 L	₹17.81 L
Year 13	₹13.00 L	₹21.74 L	₹21.80 L	₹20.58 L
Year 14	₹14.00 L	₹23.41 L	₹25.59 L	₹23.71 L
Year 15	₹15.00 L	₹25.08 L	₹29.86 L	₹27.23 L
Year 16	₹16.00 L	₹26.75 L	₹34.67 L	₹31.20 L
Year 17	₹16.00 L	₹28.42 L	₹38.83 L	₹34.42 L
Year 18	₹16.00 L	₹30.10 L	₹43.49 L	₹38.03 L
Year 19	₹16.00 L	₹31.77 L	₹48.71 L	₹42.08 L
Year 20Maturity	₹16.00 L	₹27.15 L	₹54.56 L	₹48.94 L

Wealth Compounding Curve: Policy vs. Mutual Fund Reinvestment

Surrender Value Formula

Standard Formula

V = max(G, X); X = (S × n ÷ N + B) × f

Live Calculation (Plugging Your Values)

Guaranteed surrender value (G):₹2.00 L

Sum Assured / Life Cover (₹) (S):₹16.00 L

Number of Years Premiums Paid (n):4

Premium Paying Term (Years) (N):16

Bonus accrued so far (B):₹2.69 L

Special surrender factor (f):0.300

Substituted Equation:

X = (₹16.00 L × 4 ÷ 16 + ₹2.69 L) × 0.300 = ₹2.01 L; V = max(₹2.00 L, ₹2.01 L) = ₹2.01 L

Estimated Surrender Payout Today:₹2.01 L

X is the special surrender value (SSV): the paid-up sum assured plus bonus, scaled down by the factor f, which is shown here as worked back from the result. G is the guaranteed surrender value (GSV). With under 2 years of premiums paid, the surrender value is zero.

📖 In-Depth Financial Guide13 min read

Surrendering an LIC Policy vs Reinvesting in Mutual Funds: Full GSV & SSV Math

How to calculate GSV vs SSV accurately, breaking free of the sunk cost fallacy, and why term insurance + index SIP compounds 3x higher.

Read Full Guide

Mathematical Formulas & Surrender Value Regulations

1. Guaranteed Surrender Value (GSV)

GSV = (Total Premiums Paid × GSV Factor) + (Accrued Bonus × Bonus Factor)

Minimum GSV under the IRDAI (Insurance Products) Regulations, 2024: 30% of total premiums paid in policy year 2, 35% in year 3, 50% in years 4–7 and 90% in the last two years, rising smoothly in between (this calculator draws a straight line). Total premiums paid include the first year's premium and exclude extra premiums and taxes. An older policy's own document lists the surrender value factors that apply to it. Bonuses already added to your policy also earn a surrender value, at a factor each insurer sets for its own plan; this calculator does not include that part, so your insurer's quote can be higher.

2. Special Surrender Value (SSV)

Paid-Up Sum Assured = Sum Assured × (Years Paid / PPT). The SSV factor represents the actuarial present value of the paid-up benefit.

References

How these numbers are checked →

Frequently Asked Questions — Insurance Policy Surrender

How is the LIC surrender value calculated?

Two values are compared and the higher is paid. Guaranteed Surrender Value is a percentage of total premiums paid, rising with the policy year; under the 2024 IRDAI rules that total includes the first year's premium and leaves out extra premiums, rider premiums and taxes. Special Surrender Value uses the paid-up sum assured plus vested bonuses, discounted for the unexpired term — and is usually higher after several years.

When can an LIC policy be surrendered?

Traditional endowment and money-back policies acquire a surrender value only after two full years of premiums have been paid (three years for older policies). ULIPs can be surrendered any time but proceeds are released only after the 5-year lock-in.

Should I surrender my LIC policy or make it paid-up?

If you are early in the term, surrendering usually returns far less than you paid. Making the policy paid-up stops premiums while keeping a reduced sum assured, so you avoid crystallising the loss and can redirect the premium into a term plan plus an index fund.

Is the LIC surrender value taxable?

Proceeds are exempt under Section 10(10D) if the annual premium never exceeded 10% of the sum assured (20% for policies issued before April 2012). If that test fails, the entire surrender value is taxable at slab rate and the insurer deducts 5% TDS on the income portion under Section 194DA.

What changed in surrender values under the 2024 IRDAI rules?

From the product regulations effective 2024, insurers must pay a special surrender value that is at least the present value of the paid-up sum assured plus vested bonuses, discounted at a rate tied to the government security yield. In practice this raises payouts materially for policies surrendered in years two to four, where the older guaranteed formula returned very little. Policies sold under the earlier rules keep their original contractual terms.

How do I surrender a policy, and is the old 80C reversed?

Submit the original policy document, Form 5074 as the surrender request, a cancelled cheque, NEFT mandate, PAN and an ID proof at the servicing branch; payment normally arrives in 10 to 15 working days. On tax, if you surrender a traditional policy before paying two years of premiums, the Section 80C deductions claimed earlier are reversed and added back to your income in the surrender year. For ULIPs the same clawback applies at five years.

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