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
Reinvesting the surrender cash plus saved future premiums into 12% mutual funds beats the endowment payout by ₹30,49,554.
By surrendering your policy now and investing the ₹2,51,072 payout plus future premiums into a 12% CAGR mutual fund, you can generate an estimated ₹57,64,754 at maturity—which is ₹30,49,554 more than continuing the policy.
Year-by-Year Wealth Trajectory Comparison
Track how equity mutual fund compounding overcomes the initial policy surrender haircut.
| 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 | ₹3.88 L | ₹5.41 L |
| Year 6 | ₹6.00 L | ₹10.03 L | ₹5.42 L | ₹6.62 L |
| Year 7 | ₹7.00 L | ₹11.70 L | ₹7.15 L | ₹7.97 L |
| Year 8 | ₹8.00 L | ₹13.38 L | ₹9.10 L | ₹9.50 L |
| Year 9 | ₹9.00 L | ₹15.05 L | ₹11.30 L | ₹11.22 L |
| Year 10 | ₹10.00 L | ₹16.72 L | ₹13.77 L | ₹13.16 L |
| Year 11 | ₹11.00 L | ₹18.39 L | ₹16.55 L | ₹15.35 L |
| Year 12 | ₹12.00 L | ₹20.06 L | ₹19.68 L | ₹17.81 L |
| Year 13 | ₹13.00 L | ₹21.74 L | ₹23.20 L | ₹20.58 L |
| Year 14 | ₹14.00 L | ₹23.41 L | ₹27.16 L | ₹23.71 L |
| Year 15 | ₹15.00 L | ₹25.08 L | ₹31.62 L | ₹27.23 L |
| Year 16 | ₹16.00 L | ₹26.75 L | ₹36.64 L | ₹31.20 L |
| Year 17 | ₹16.00 L | ₹28.42 L | ₹41.03 L | ₹34.42 L |
| Year 18 | ₹16.00 L | ₹30.10 L | ₹45.96 L | ₹38.03 L |
| Year 19 | ₹16.00 L | ₹31.77 L | ₹51.47 L | ₹42.08 L |
| Year 20Maturity | ₹16.00 L | ₹27.15 L | ₹57.65 L | ₹48.94 L |
Wealth Compounding Curve: Policy vs. Mutual Fund Reinvestment
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.
Mathematical Formulas & Surrender Value Regulations
1. Guaranteed Surrender Value (GSV)
GSV = (Total Premiums Paid × GSV Factor) + (Accrued Bonus × Bonus Factor)
As per IRDAI guidelines, GSV factor scales from 30% (Year 2) up to 85–90% (Year 15+). 1st-year premium & taxes are excluded.
2. Special Surrender Value (SSV)
SSV = [Paid-Up Sum Assured + Accrued Bonus] × SSV Factor
Paid-Up Sum Assured = Sum Assured × (Years Paid / PPT). The SSV factor represents the actuarial present value of the paid-up benefit.
Authoritative Regulatory Sources & Acts
Frequently Asked Questions — Insurance Policy Surrender
Life Insurance Policy Surrender FAQs
Crucial considerations before surrendering insurance policies in India.
Is surrender value received from a life insurance policy taxable?
If you surrender an endowment policy before paying premiums for at least 2 full years, the surrender proceeds are fully taxable as income from other sources. Furthermore, any Section 80C deductions claimed in previous years are reversed and added back to taxable income.
What is the difference between surrendering a policy and making it paid-up?
Surrendering terminates the contract immediately for a discounted cash payout. Making a policy paid-up stops further premium obligations while keeping the policy alive with a proportionately reduced sum assured payable at maturity or upon death.
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