Can I Surrender My LIC Policy After 3 Years? Value and Rules 2026

It is always a good idea to review your insurance policy and make informed decisions about surrendering it, especially after 3 years, to avoid losing money

In India, many people invest in LIC policies, such as Plan 715 and Plan 736, for their long-term financial goals, including Maturity (मैच्युरिटी) and Sum Assured (बीमा राशि) benefits. However, sometimes policyholders may need to surrender their policies due to financial constraints or other reasons. If you are considering surrendering your LIC policy after 3 years, it is essential to understand the rules and value of surrendering to make an informed decision. In 2026, the insurance market in India is becoming increasingly competitive, and policyholders have various options, including fixed deposits, public provident funds, and term insurance plans

Surrendering a LIC policy after 3 years can result in a significant loss of Premium (प्रीमियम) paid, as well as potential bonuses and interest. However, in some cases, surrendering a policy may be the best option, especially if the policyholder is facing financial difficulties or needs immediate funds. It is crucial to calculate the surrender value and compare it with other investment options, such as fixed deposits, which may offer higher returns, or term insurance plans, which may provide more comprehensive coverage

Understanding LIC Policy Surrender Value

The surrender value of a LIC policy is the amount paid to the policyholder when they surrender their policy. The surrender value is calculated based on the Premium (प्रीमियम) paid, the policy term, and the bonus rates. For example, if you have a Plan 715 policy with a Sum Assured (बीमा राशि) of ₹1,00,000 and a Premium (प्रीमियम) of ₹10,000 per year, the surrender value after 3 years may be around ₹25,000 to ₹30,000, depending on the bonus rates, which are currently ₹45 per ₹1,000 sum assured. This amount may not be sufficient to cover the Premium (प्रीमियम) paid, resulting in a significant loss

• The policy term and Premium (प्रीमियम) paid affect the surrender value
• Bonus rates, such as ₹45 per ₹1,000 sum assured, impact the surrender value
• The surrender value may not cover the total Premium (प्रीमियम) paid

Calculating XIRR Return on LIC Policy

To calculate the XIRR return on a LIC policy, you need to consider the Premium (प्रीमियम) paid, the surrender value, and the time period. For example, if you have a Plan 736 policy with a Premium (प्रीमियम) of ₹20,000 per year for 5 years and a surrender value of ₹50,000 after 3 years, the XIRR return can be calculated using the following formula: XIRR = (Surrender Value / Total Premium (प्रीमियम) Paid) ^ (1 / Time Period) - 1. Using this formula, the XIRR return for this example would be around 4% to 5%, which is lower than the returns offered by fixed deposits or public provident funds

• The XIRR return calculation takes into account the Premium (प्रीमियम) paid and the surrender value
• The time period affects the XIRR return
• The XIRR return may be lower than other investment options

Comparison with Fixed Deposits and Term Insurance Plans

When considering surrendering a LIC policy, it is essential to compare the returns with other investment options, such as fixed deposits and term insurance plans. Fixed deposits offer a fixed return, typically around 5% to 6% per annum, and are generally considered a low-risk investment. Term insurance plans, on the other hand, provide comprehensive coverage and may offer higher returns, but they often come with higher Premium (प्रीमियम) payments. For example, a 5-year fixed deposit with a bank like State Bank of India may offer a return of around 5.5% per annum, while a term insurance plan may offer a return of around 7% to 8% per annum, depending on the insurance provider and the policy terms

• Fixed deposits offer a fixed return, typically around 5% to 6% per annum
• Term insurance plans may offer higher returns, but with higher Premium (प्रीमियम) payments
• The returns on fixed deposits and term insurance plans may be higher than the XIRR return on a LIC policy

LIC Policy Surrender Value Calculation Example

To illustrate the surrender value calculation, let's consider an example. Suppose you have a Plan 715 policy with a Sum Assured (बीमा राशि) of ₹2,00,000 and a Premium (प्रीमियम) of ₹15,000 per year. After 3 years, you decide to surrender the policy. The surrender value can be calculated as follows: Surrender Value = (Premium (प्रीमियम) Paid x Surrender Value Factor) + Bonus. Assuming a surrender value factor of 0.5 and a bonus of ₹20 per ₹1,000 sum assured, the surrender value would be around ₹40,000 to ₹50,000. This amount may not be sufficient to cover the total Premium (प्रीमियम) paid, resulting in a significant loss

• The surrender value calculation takes into account the Premium (प्रीमियम) paid and the surrender value factor
• The bonus amount affects the surrender value
• The surrender value may not cover the total Premium (प्रीमियम) paid

Practical Advice for LIC Policyholders

If you are considering surrendering your LIC policy after 3 years, it is essential to seek practical advice from a financial advisor or an insurance expert. They can help you calculate the surrender value, compare it with other investment options, and make an informed decision. Additionally, policyholders should review their policy documents carefully and understand the terms and conditions, including the surrender value factor, bonus rates, and Premium (प्रीमियम) payments. It is also crucial to consider the impact of surrendering a policy on your long-term financial goals, including Maturity (मैच्युरिटी) and Sum Assured (बीमा राशि) benefits

• Seek practical advice from a financial advisor or insurance expert
• Review policy documents carefully and understand the terms and conditions
• Consider the impact of surrendering a policy on long-term financial goals

Summary of LIC Policy Surrender Value