Life Insurance Corporation of India (LIC) is one of the largest and most trusted insurance providers in the country. One crucial aspect of any life insurance policy is its surrender value. The surrender value is the amount payable to the policyholder in case they decide to terminate the policy before its maturity date. This article will delve into the intricacies of LIC surrender value, exploring the formula, chart, and the role of calculators in determining this crucial financial aspect.
What is the LIC surrender value?
The surrender value is the amount of money received by the policyholder from LIC if the policy is surrendered before its maturity date. The surrender value is computed using the premiums paid and the accumulated bonuses on the contract. It’s worth noting that the surrender value is usually less than the total of premiums paid.
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What is the significance of LIC Surrender Value?
Policyholders must understand the surrender value of LIC policies in order to make informed judgements regarding their life insurance plans. Here are some of the reasons why the Surrender Value is important:
- Financial adaptability
Life circumstances might change, and policyholders may need funds for a variety of reasons, such as an emergency, education, or a major life event. The surrender of an insurance policy can provide the required money.
- Strategy for Exit
Due to financial constraints, policyholders may find it difficult to continue paying premiums in some instances. Surrendering/withdrawing a lic policy can be an exit option that stops the policy from lapse.
- Alternative Investment Opportunities
There are situations when a policyholder is dissatisfied with the benefits provided by their current policy. In this circumstance, surrendering a policy becomes critical. Surrendering an insurance policy enables policyholders to investigate alternative investing options that may provide better returns.
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Surrender Value Formula
The surrender value is calculated using a formula that takes into account various factors, including the policy duration, premiums paid, and bonuses accrued. The basic formula for surrender value calculation is as follows:
Surrender Value = (1+rP×(1−TTN)) + (1+r) NB
Where:
P is the total premiums paid.
T is the policy term in years.
N is the number of years the policy has been in force.
r is the applicable interest rate.
B is the bonus amount, if applicable.
(Number of Premiums Paid/Total Number of Premiums) x (Sum Assured + Accumulated Bonus) = Surrender Value
Let’s dissect this formula to see how to compute the surrender value:
The total amount of premiums paid up to the date of surrender is referred to as the number of premiums paid.
- Total Premiums: This is the total number of premiums that should have been paid in order for the policy to mature.
- Sum Assured: This is the amount of money that the policyholder is assured to receive from LIC if the policy is not surrendered before it matures.
- Accumulated Bonus: The amount of bonus earned by the policy up to the date of surrender.
Once you’ve determined these numbers, you can enter them into the
Surrender Value and LIC Policy Types
LIC provides a variety of insurance products, each with its own Surrender Value computation. Here are some examples of common LIC policies:
1. Policies on Endowments
Endowment policies provide both life insurance and a savings component. Endowment policies often have a Surrender Value that becomes payable after a certain number of years. The actual Surrender Value computation is determined by the terms and circumstances of the policy.
2. Policies of Term Insurance
Term insurance products provide only protection and have no savings component. They do not have a surrender value because the primary goal is to offer financial security to the policyholder’s family in the event of their death.
3. Jeevan Saral Bima
Jeevan Saral is a popular LIC insurance that is noted for its versatility. It offers a Maturity Sum Assured and a Surrender Value that is determined by the number of premiums paid. The LIC Surrender Value Calculator is very beneficial for Jeevan Saral policyholders. To calculate the maturity value, utilise the LIC Jeevan Saral Bima calculator.
4. Policies that cover you for the rest of your life
Whole-life insurance give coverage for the policyholder’s whole life. The Surrender Value for this insurance is usually decided at the end of the policy period.
Advantages of LIC Surrender Value Calculator
The following are the advantages of employing an online surrender value calculator:
- Online calculators provide instant results, allowing you to make informed decisions without delay.
- Accuracy: The computations are precise and based on the most recent LIC data and equations.
- Convenience: You can use the calculator at any time, making it simple to determine the Surrender Value of your policy.
Surrender Value Influencing Factors
The Surrender Value of a LIC policy is influenced by a number of factors. These criteria should be considered because they can have a major impact on the amount you receive when you surrender your policy:
1. Policy Period
The higher the Surrender Value, the longer the policy has been in effect. This is one of the reasons why LIC policyholders prefer policies with longer policy terms.
2. Paid Premiums
The total premiums paid for the coverage can have an impact on the Surrender Value. A larger Surrender Value may arise from higher premiums paid.
3. Assured Sum
Another factor that influences the Surrender Value is the sum assured or coverage amount. A higher Surrender Value may come from increased coverage.
4. Type of Policy
Surrender Value computations differ between LIC plans. Endowment policies, for example, have different rules than other types of life insurance policies.
5. Bonus and Loyalty Increases
On some policies, LIC frequently issues bonuses and loyalty additions. These can dramatically increase the Surrender Value.
How Do I Cancel My LIC Policy?
Typically, consumers purchase LIC policies without thoroughly reviewing the terms and circumstances, resulting in the policy being closed before it reaches maturity. At this point, LIC gives the policyholder a portion of the total. This sum is referred to as the surrender value.
Surrendering the insurance is usually done owing to unhappiness with the policy’s characteristics. Always double-check all of the terms before purchasing a policy.
Policyholders can only surrender their policies after paying their payments on time for nearly three years.
FAQs-
- Q. Is the LIC surrender value advantageous?
Ans. Yes, LIC surrender value is advantageous when you terminate your existing LIC insurance before the policy term expires.
- Q. What are the many kinds of LIC policies?
Ans. Endowment, term insurance, and a few other types of LIC plans are available.
- Q. How can I figure out the LIC surrender value?
Ans. To determine the LIC surrender value, utilise the LIC surrender value calculator.
