When you stop paying LIC premiums after completing at least 3 years, your policy does not automatically lapse - it converts to paid-up status. This is one of LIC's most misunderstood but important features.
What is Paid-Up Status?
A paid-up policy is one where:
- ▸You have stopped paying premiums
- ▸But the policy has not been surrendered
- ▸The life cover continues - but at a reduced amount called the Paid-Up Sum Assured
Formula: Paid-Up Sum Assured = (Number of premiums paid ÷ Total premiums payable) × Original Sum Assured
Example: 20-year endowment policy, Rs 10 lakh sum assured. You paid 8 years (annual premium), then stopped. Paid-Up SA = (8/20) × Rs 10 lakh = Rs 4 lakh
You still have Rs 4 lakh life cover. And at maturity (year 20), you receive Rs 4 lakh + any bonus accrued during the paid-up period (bonus accrual typically stops when policy goes paid-up).
When Does Paid-Up Apply?
Paid-up conversion is automatic when:
- ▸At least 3 years of premiums have been paid
- ▸You stop paying further premiums
- ▸The policy is NOT surrendered
If you have paid fewer than 3 years of premiums and stop paying, the policy lapses (no value).
Paid-Up vs Surrender - Which is Better?
Almost always: paid-up is better than surrender.
Surrender gives you cash now but ends the policy. Paid-up gives you no cash now, but the policy continues with reduced cover and you receive the paid-up maturity amount at the original maturity date.
The only time surrender makes sense is if you desperately need cash immediately and cannot wait for maturity.
Reactivating a Paid-Up Policy
You can revive a paid-up policy by paying all outstanding premiums + interest within 2 years of it going paid-up (5 years with health declaration). After revival, the original sum assured is restored.
How to Check Your Paid-Up Value
- ▸Log in to LIC customer portal (customer.onlineportal.licindia.in)
- ▸Under "Policy Status," check if your policy shows "Paid-Up"
- ▸The paid-up sum assured is displayed in your policy details
Or call your branch/agent and quote your policy number. Ajay Kumar Poddar at 9415313434 can help you evaluate whether to keep your policy paid-up or revive it.
