How to Calculate LIC Surrender Value: Formula and Examples

Surrender value is the amount LIC pays you when you terminate your policy before maturity. Understanding how to calculate it prevents unpleasant surprises and helps you make an informed decision.

## Two Types of Surrender Value

**1. Guaranteed Surrender Value (GSV)** This is the minimum LIC must pay. Formula:

**GSV = (Paid Premiums - First Year's Premium) × GSV Factor**

The GSV Factor depends on the year of surrender relative to the policy term: - Surrender in Year 3: Factor ≈ 30% - Surrender in Year 5: Factor ≈ 35-40% - Surrender in Year 10: Factor ≈ 50-55% - Surrender in Year 15 (of 20-year plan): Factor ≈ 60-70%

**2. Special Surrender Value (SSV)** Calculated as: Paid-Up Sum Assured + Accrued Bonus × (SSV Factor)

LIC pays you the **higher of GSV or SSV**.

## Worked Example

20-year endowment plan: - Sum Assured: Rs 10 lakh - Annual Premium: Rs 27,500 - Surrender after 10 years (Rs 2,75,000 total paid)

**GSV Calculation:** Paid premiums excluding year 1 = Rs 2,47,500 GSV Factor at year 10 of 20-year plan ≈ 50% GSV = Rs 2,47,500 × 50% = **Rs 1,23,750**

**SSV Calculation:** Paid-Up SA = (10/20) × Rs 10 lakh = Rs 5 lakh Accrued SRB (Rs 45/1000 × 10 years) = Rs 4,50,000 in bonus SSV Factor ≈ 60-70% on paid-up policy value SSV = approximately Rs 2,50,000 to Rs 3,00,000

LIC pays SSV = approximately **Rs 2.5-3 lakh**

Total premiums paid: Rs 2.75 lakh. You receive roughly the same — no real gain, but also no loss in nominal terms.

## The Real Cost of Surrendering

The real loss is not the surrender value today — it is the maturity value you are giving up. At maturity (year 20), this policy would have paid Rs 10 lakh + Rs 9-10 lakh bonus = Rs 19-20 lakh. By surrendering at year 10, you get Rs 2.5-3 lakh. That is the opportunity cost.

## Use Our Surrender Value Calculator

Check estimated surrender value with our [surrender value calculator](/calculators/surrender-value). For your specific policy's exact figure, call Ajay Kumar Poddar at 9415313434 with your policy number — he can pull the exact surrender value from LIC's records.