LIC Surrender Value Rules: How Much You Get Back and When to Surrender

LIC surrender value is what you get back if you end a traditional LIC policy before it matures. It is the higher of the guaranteed surrender value (GSV) and the special surrender value (SSV), and it is available only after a minimum period of premium payment. Surrendering early almost always means getting back less than you paid, so this guide explains the rules, shows a worked example, and covers the alternatives.

When can you surrender an LIC policy?

The waiting period depends on when your policy was issued:

Policy type	Surrender value available after
Most regular-premium plans sold before 1 Oct 2024 (for example 9xx and 8xx series)	2 full years’ premium
Some older plans (pre-2014, such as Jeevan Saral)	3 full years’ premium
Policies issued from 1 Oct 2024 (for example 7xx relaunches)	Completion of the first policy year, with one full year’s premium paid
Single premium policies	Soon after the premium is paid, as per the policy terms

If you surrender before these points, there is usually nothing to pay out. A new policy can also be returned during the free-look period, which IRDAI’s 2024 rules extended from 15 to 30 days. In that case you get your premium back after small deductions, which is far better than surrendering later.

Term plans (Digi Term, New Jeevan Amar) do not build a surrender value in the regular-premium version, because they have no savings element.

GSV vs SSV: the two surrender values

Guaranteed surrender value (GSV) is the minimum the policy promises. It is usually:

• a GSV factor (a percentage) × total premiums paid, excluding extra premiums, rider premiums and taxes (many older LIC plans also exclude the first year’s premium), plus
• a cash value of the vested bonus, which is only a small fraction of the bonus.

GSV factors are low in the early years, typically around 30%, and rise with each year the policy runs, to around 90% near the end of the term.

Special surrender value (SSV) is calculated by LIC and is usually higher once the policy has run a few years. It starts from the paid-up value (explained below) and discounts it back to today, because you are taking the money now instead of at maturity. LIC can revise its SSV factors from time to time.

LIC pays the higher of GSV and SSV.

Paid-up value: what happens if you just stop paying

If you stop paying premiums after the policy has acquired a surrender value, it does not lapse completely. It becomes a paid-up policy with a reduced sum assured:

Paid-up value = sum assured × (premiums paid ÷ premiums payable) + bonuses already vested

The paid-up value is paid at maturity, or on earlier death. A paid-up policy normally stops earning new bonuses, and riders stop. The SSV is essentially this paid-up value brought back to today’s money.

What changed on 1 October 2024

IRDAI issued a Master Circular on life insurance products on 12 June 2024 and gave insurers until 30 September 2024 to bring their products in line. From 1 October 2024, new non-linked savings policies follow these surrender rules:

• A surrender value is payable once the first policy year is complete and one full year’s premium has been paid. Earlier, most policies paid nothing if surrendered in the first two years.
• For policies with a premium paying term under five years, surrender value is payable after one year’s premium. For single premium policies, it is payable after the premium is paid.
• The SSV must be at least the expected present value of the paid-up sum assured, paid-up future benefits and accrued bonuses, allowing for any survival benefits already paid.
• The discount rate used for this can be no more than 0.5 percentage points above the 10-year government bond yield, which stops insurers from shrinking the SSV with a high discount rate.
• Non-linked savings plans that offer a surrender value must also offer a policy loan.

LIC relaunched its main plans in October 2024 (as the 7xx versions) to meet these rules. The new rules apply only to policies issued from 1 October 2024. If you bought your LIC policy earlier, your original policy terms still decide your surrender value.

Worked example: surrendering a ₹5 lakh policy

A 30-year-old took New Endowment Plan 914 for ₹5 lakh and 20 years. Our New Endowment 914 calculator puts the yearly premium at ₹24,470. Assuming an average bonus of ₹40 per ₹1,000, here is what the LIC surrender value calculator estimates:

Years of premium paid	Premiums paid	GSV	SSV (estimate)	Surrender value	Share of premiums back
2	₹48,940	₹13,341	₹26,628	₹26,628	54%
3	₹73,410	₹23,682	₹42,738	₹42,738	58%
5	₹1,22,350	₹63,940	₹81,550	₹81,550	67%
7	₹1,71,290	₹1,23,774	₹1,30,714	₹1,30,714	76%
10	₹2,44,700	₹2,28,207	₹2,28,757	₹2,28,757	93%
15	₹3,67,050	₹3,53,322	₹4,81,266	₹4,81,266	131%

Look at year 7. The policyholder has paid ₹1,71,290 and would get about ₹1,30,714 by surrendering, a loss of roughly ₹40,576. The same policy made paid-up would have a paid-up value of ₹3,15,000 (₹5 lakh × 7/20 = ₹1,75,000, plus ₹1,40,000 of vested bonus) payable at maturity, 13 years later. A loan of up to about ₹1,17,642 would also be possible while the policy continues.

Our calculator estimates SSV by discounting the paid-up value at an assumed 7% a year. LIC’s actual SSV factors differ by plan and change over time, so ask LIC for the exact quote before you decide.

Tip: The share you get back rises sharply in the later years. If you are past the halfway mark, surrendering is rarely the best choice.

Alternatives to surrendering your policy

Before you sign the surrender form, compare these options:

1. Policy loan. Borrow against the policy, typically up to 90% of the surrender value for an in-force policy. Life cover and bonuses continue. Interest is charged, and any unpaid loan is deducted from the claim. Our guide to the LIC loan against policy covers the details.
2. Make it paid-up. Stop paying and let the reduced sum assured and vested bonuses grow until maturity. This works well if you only need to free up cash flow, not raise a lump sum.
3. Assignment. You can assign the policy to a bank as security for a loan, or transfer it to another person for value. LIC can refuse an assignment it does not consider bona fide or in the policyholder’s interest. Buyers of old policies are few, so explore this only if the surrender value is poor.
4. Revival later. If a policy has lapsed because of cash trouble, LIC usually allows revival within a set period by paying the arrears with interest.

If you only need part of the money, compare the loan and the paid-up value using the maturity calculator and the bonus calculator before you decide. For how the bonus part of your policy builds up, see our guide to how LIC bonus is calculated.

Tax on LIC surrender value

The following references are to the Income-tax Act, 1961. The Income-tax Act, 2025 has applied from 1 April 2026 and carries these rules forward under new section numbers, so confirm the current section with a tax adviser.

• Section 80C reversal. If you end a policy before premiums for two years have been paid, the 80C deductions you claimed earlier are added back to your income in the year you surrender.
• Section 10(10D) exemption. Surrender proceeds are tax-free if the premium in any year stayed within 10% of the sum assured (20% for policies issued between April 2003 and March 2012). For non-ULIP policies issued on or after 1 April 2023, the exemption also needs your total yearly premium across such policies to be ₹5 lakh or less.
• If not exempt, only the income part (proceeds minus premiums paid) is taxable. LIC deducts TDS at 2% on that income part, a rate that applies from 1 October 2024 (it was 5% earlier). No TDS applies if payments in the year total less than ₹1 lakh.

Premiums on individual life policies have been GST-exempt since 22 September 2025, so GST is no longer part of the premium on new receipts. GST shown on older receipts is not refunded on surrender.

Key takeaways

• Surrender value = higher of GSV and SSV, available after 2 full years’ premium on most older LIC plans.
• Policies issued from 1 October 2024 get a surrender value after one full year’s premium, with SSV linked to the paid-up value.
• Early surrender usually returns only 50–70% of premiums paid. Later surrenders return much more.
• A policy loan or the paid-up option usually protects more value than surrender.
• Check the Section 10(10D) conditions and the two-year 80C rule before surrendering.

These figures are estimates from our independent calculators and are not quotes from LIC. For the exact surrender value of your policy, ask your LIC branch or check it through LIC’s customer portal.