Surrender Value of LIC Policy means when you surrender LIC policy prematurely amount paid by LIC to you. The surrender of LIC policy may be due to an urgent need of money, such as a medical emergency, job loss, business loss, or anything.
Most of the people think that surrender value means whatever premium you have paid will be returned by LIC, but it is not the case. Surrender value is something else, and surrender value depends on total premium paid and the policy type. In this guide, I will explain what the surrender value of an LIC policy is and how to calculate it.
What Is the Surrender Value of LIC Policy?
The Surrender Value of LIC Policy is the amount of money LIC (Life Insurance Corporation of India) pays you if you decide to exit your policy before its maturity date. Think of it as a refund — but not a full one.
You must remember that you can not surrender all LIC policies. Only money back plans, endowment plans and whole-life plans can be surrendered. Term insurance policies, since they’re purely protective, don’t accumulate any cash value and hence have zero surrender value.
When Can You Actually Surrender a LIC Policy?
Great question! LIC has a simple rule here:
A policy becomes eligible for surrender only after the policyholder has paid premiums for at least 3 consecutive years.
So if you’ve been paying for, say, 2 years and you stop — you don’t get anything back. You’d lose your premiums entirely. But cross that 3-year mark, and the door opens.
In 2026, this rule remains unchanged. Whether your policy started in 2018 or 2022, the minimum 3-year paid-up requirement applies.
Two Types of Surrender Value You Must Know
This is where it gets a little interesting. The Surrender Value of LIC Policy is actually calculated in two different ways, and LIC pays you whichever amount is higher of the two. Here’s how they work:
- Guaranteed Surrender Value (GSV)
The Guaranteed Surrender Value is the baseline — it’s the minimum amount LIC is obligated to pay you. It’s pre-defined in your policy document and doesn’t change based on market conditions.
GSV Formula:
GSV = (Total Premiums Paid × GSV Factor%) + (Accrued Bonuses × Bonus GSV Factor%)
The GSV Factor is a percentage table that increases with policy duration. The longer you’ve held the policy, the higher the GSV factor — and the more money you get back. These factors are prescribed by the Insurance Regulatory and Development Authority of India (IRDAI).
A rough idea of GSV factors:
| Policy Year |
GSV Factor (Approx.) |
| 3rd Year |
30% |
| 4th–5th Year |
50% |
| 6th–7th Year |
55%–60% |
| 8th–9th Year |
65%–70% |
| 10th+ Year |
70%–90% |
So yeah — the earlier you surrender, the worse the deal for you.
- Special Surrender Value (SSV)
The Special Surrender Value is more dynamic. LIC calculates it based on the paid-up value of your policy and then applies a special surrender value factor.
SSV Formula:
Paid-Up Value = (Number of Premiums Paid ÷ Total Number of Premiums) × Sum Assured + Accrued Bonus
SSV = Paid-Up Value × SSV Factor%
The SSV factor, like the GSV factor, depends on the policy term and the number of years the policy has been in force. LIC periodically revises these factors, so in 2026, it’s worth checking the current table either on LIC’s official website or through your nearest LIC branch.
LIC pays you the higher of GSV or SSV. Always. That’s the rule.
How to Calculate Surrender Value of LIC Policy in 2026
Alright, let’s get practical! Here’s a clear, step-by-step process you can follow right now.
Step 1: Gather Your Policy Details
You’ll need:
- Policy document (or e-policy from LIC portal)
- Sum Assured amount
- Policy term (total years)
- Premium payment term
- Number of years/premiums already paid
- Accrued bonus (available in your policy statement or LIC portal)
Step 2: Calculate Total Premiums Paid
Simple math here:
Total Premiums Paid = Annual Premium × Number of Years Paid
Note: Don’t include the first year’s premium if it’s a regular premium policy, as LIC excludes it in some cases — check your policy terms.
Step 3: Find the Applicable GSV Factor
Look up the GSV factor table for your specific policy. The factor depends on:
- The type of policy (endowment, money-back, whole life)
- How many years you’ve paid premiums
- The original policy term
If you can’t find the table, contact LIC’s helpline at 1800-227-717 (toll-free) or log in to the LIC portal at licindia.in.
Step 4: Calculate the Guaranteed Surrender Value
Plug your numbers into this formula:
GSV = (Total Premiums Paid × GSV Factor) + (Accrued Bonus × Bonus GSV Factor)
Step 5: Calculate the Special Surrender Value
First, find the paid-up value:
Paid-Up Value = (Premiums Paid ÷ Total Premiums Payable) × Sum Assured + Accrued Bonus
Then:
SSV = Paid-Up Value × SSV Factor
Step 6: Compare and Confirm
LIC will pay you whichever is higher — GSV or SSV. That’s your approximate surrender value.
A Practical Example — Let’s Make It Crystal Clear
Let’s say Ramesh has an LIC Jeevan Anand (Plan 915) policy with the following details:
- Sum Assured: ₹5,00,000
- Policy Term: 20 years
- Premium Payment Term: 20 years
- Annual Premium: ₹25,000
- Years Premium Paid: 7 years
- Accrued Bonus: ₹70,000
GSV Calculation:
- Total Premiums Paid = ₹25,000 × 7 = ₹1,75,000
- GSV Factor at 7th year ≈ 60%
- Bonus GSV Factor ≈ 30%
GSV = (₹1,75,000 × 60%) + (₹70,000 × 30%) GSV = ₹1,05,000 + ₹21,000 = ₹1,26,000
SSV Calculation:
- Paid-Up Value = (7/20) × ₹5,00,000 + ₹70,000 = ₹1,75,000 + ₹70,000 = ₹2,45,000
- SSV Factor ≈ 60% (varies, let’s use this estimate)
SSV = ₹2,45,000 × 60% = ₹1,47,000
Since SSV (₹1,47,000) > GSV (₹1,26,000), LIC pays ₹1,47,000.
Of course, the actual amounts will depend on the exact GSV/SSV factor tables for that specific plan and year — but this gives you a solid ballpark!
Factors That Affect the Surrender Value of LIC Policy
Several things influence how much you’ll walk away with:
- Policy duration: Longer you’ve paid, higher the surrender value. It’s as simple as that.
- Type of policy: Endowment plans tend to have better surrender values than money-back plans.
- Sum assured: A higher sum assured generally means a higher paid-up value and, consequently, a better SSV.
- Accrued bonuses: LIC declares bonuses annually. More bonuses = more surrender value.
- Policy status: Is your policy active (premiums being paid) or paid-up (you stopped paying)? Active policies usually yield better surrender values.
- Loan outstanding: If you’ve taken a loan against your policy, that outstanding amount gets deducted from the surrender value.
What Happens to Your Bonus When You Surrender?
Ah, bonuses — the little gift inside every participating LIC plan! LIC declares reversionary bonuses each year, and these keep accumulating as long as your policy is active. When you surrender, LIC applies a bonus surrender factor — which is typically much lower than the face value of the bonus.
So don’t walk in expecting to get 100% of your accrued bonus. You’ll typically receive 30%–50% of it, depending on how long the policy has been running. Still, it adds up — and it’s money in your hand.
How to Apply for Surrender of LIC Policy in 2026
Ready to go ahead? Here’s the process:
- Visit your nearest LIC branch — bring your original policy bond, ID proof, address proof, cancelled cheque, and NEFT details.
- Fill out the Surrender Form (No. 5074) — available at the branch or downloadable from licindia.in.
- Submit all documents — the LIC officer will verify everything.
- Processing time — typically 7 to 10 working days.
- Amount credited — LIC directly transfers the surrender amount to your registered bank account via NEFT.
You can also initiate the process online via the LIC Customer Portal if your policy is digitally registered. It’s way more convenient than standing in line, honestly.
Should You Actually Surrender Your LIC Policy?
Look, here’s the truth — surrendering is usually not the best move unless you’re genuinely desperate. Here’s why:
- You lose your life insurance cover permanently.
- You lose the maturity benefit — which could be significantly higher than the surrender value.
- The surrender value of LIC policy is always less than what you’d receive at maturity.
- Bonus accumulation stops the moment you surrender.
Better alternatives to consider before surrendering:
- Paid-up option: Stop paying premiums but keep the policy alive. You won’t earn new bonuses, but your life cover continues at a reduced level.
- Policy loan: Borrow up to 90% of the surrender value without surrendering the policy. Interest rates are reasonable (typically 9–10% per annum in 2026).
- Premium holiday: Some LIC plans allow temporary suspension of premiums.
That said, if you’ve held the policy for 15+ years and only a year or two remains until maturity — please don’t surrender! You’re so close to the finish line. Surrendering at that point would be like leaving a race with 200 meters to go.
Tax Implications of LIC Policy Surrender in 2026
Money received as the Surrender Value of LIC Policy is subject to income tax under certain conditions:
- If the policy qualifies under Section 10(10D) of the Income Tax Act — meaning premiums paid were less than 10% of the sum assured — the surrender amount is tax-free.
- If the premiums exceed that threshold, the surrender value becomes taxable as income under “Income from Other Sources.”
- TDS (Tax Deducted at Source): LIC deducts 5% TDS if the surrender amount exceeds ₹1 lakh and the policy doesn’t meet Section 10(10D) conditions. However, if you submit a Form 15G or 15H, you may be exempt from TDS.
Always consult a tax advisor before surrendering — a little planning can save you a fair amount.
Common Mistakes People Make When Surrendering LIC Policies
Yikes! These are real slip-ups you’d want to avoid:
- Surrendering too early — surrendering in years 3–5 gives you back barely 30–50% of your premiums. That’s a significant loss.
- Not checking loan options first — many people surrender without realizing they could have simply taken a loan against the policy.
- Ignoring tax implications — getting hit with unexpected TDS or income tax is no fun.
- Not updating bank details — if your NEFT details are outdated, the credit gets stuck. Update them before applying.
- Surrendering close to maturity — as mentioned earlier, this is almost always a bad idea financially.
FAQs
Q1. What is the minimum period after which I can surrender my LIC policy?
You must have paid premiums for at least 3 consecutive years before your policy becomes eligible for surrender.
Q2. Will I get my full premium amount back when I surrender?
No, you won’t. The Surrender Value of LIC Policy is always less than the total premiums paid, especially in the early years. The longer you wait, the more you get back.
Q3. How do I check my LIC surrender value online?
Log in to licindia.in using your policy number and registered mobile number. Under the policy details section, you’ll find an option to view the current surrender value.
Q4. Is the surrender value of LIC policy taxable?
It depends. If your policy qualifies under Section 10(10D) of the Income Tax Act, it’s tax-free. Otherwise, it’s taxable as income, and LIC may deduct TDS.
Q5. Can I surrender a LIC term plan?
No. Term insurance policies have no savings component and therefore no surrender value. Only participating plans like endowment, money-back, and whole life policies can be surrendered for a cash value.
Q6. Does surrendering a policy affect my credit score?
No, surrendering a LIC policy does not impact your credit score in India. It’s simply a contractual termination between you and LIC.
Q7. What if I have a loan against my LIC policy and I want to surrender it?
LIC will deduct the outstanding loan amount (principal + interest) from your surrender value before crediting the balance to your account.
Q8. How is the surrender value of LIC policy different from paid-up value?
Surrender value is what you receive when you terminate the policy completely. Paid-up value is the reduced benefit you retain if you stop paying premiums but keep the policy alive without surrendering. Paid-up is the safer option if you want to retain some coverage.
Conclusion
I hope it is now clear that what the surrender value of LIC policy and how to calculate it. Before surrender of LIC policy, you must calculate surrender value and if required you must consult advisor and tax person to calculate your tax liabilities. Don’t take any finance decision blindly if required get in touch with LIC agent or LIC via free helpline, you can also visit LIC office if required.
