LIC Surrender Value vs Paid-Up Value Calculator
Calculate and compare the financial outcomes of surrendering your LIC policy immediately vs. converting it to a reduced paid-up policy.
If you can no longer pay your LIC premiums, you have two primary options: surrendering the policy for immediate cash, or converting it to a paid-up policy. Under the latest 2026 IRDAI rules, both options are available after paying premiums for just 1 full year.
Use this calculator to compare the immediate surrender payout against the future value of a paid-up policy at maturity:
- Option A (Surrender Payout): You receive immediate cash today, but the insurance cover ends, and you take a heavy penalty loss.
- Option B (Paid-Up Conversion): Premium payments stop completely. The policy remains active with a reduced Sum Assured, and the full accrued bonuses are paid out at maturity.
- Recommendation: Generally, converting to Paid-Up prevents severe loss of capital and preserves valuable life cover.
Policy Details
Immediate cash payout today
- Net Financial Loss тВ╣0
- Loss Percentage 0%
- Remaining Life Cover Terminated
- Availability Instant Cash
Maturity value (no further premiums)
- Paid-Up Sum Assured тВ╣0
- Vested Accumulated Bonus тВ╣0
- Reduced Life Cover тВ╣0
- Availability At Maturity
Detailed Calculations
Ready to Compare Exit Options
Enter your LIC policy variables in the left-hand form to visually compare surrendering the policy vs. letting it become a paid-up policy.
Related Financial Tools
Section 1: Surrendering vs. Converting to Paid-Up
When a policyholder cannot or does not want to pay future premiums for an LIC policy, they face a critical decision. They can either surrender the policy for immediate cash or convert it to a paid-up status.
Surrendering terminates the contract immediately. The insurer calculates the Guaranteed Surrender Value (GSV) and Special Surrender Value (SSV), paying out the higher of the two. However, this option almost always results in a massive financial penalty, especially in the early years.
In contrast, converting to a paid-up policy allows the policyholder to stop paying premiums while keeping the policy active. The Sum Assured is reduced proportionally based on the number of premiums paid, and the accumulated bonuses remain locked in until the policy's maturity.
Section 2: Mathematical Formulas Involved
The mathematical equations used to evaluate these two exit pathways are defined by standard Indian actuarial guidelines:
- Paid-Up Sum Assured: This represents the reduced death and survival benefit payable at maturity. $$\text{Paid-Up Sum Assured} = \frac{\text{Premiums Paid Years}}{\text{Premium Paying Term (PPT)}} \times \text{Original Sum Assured}$$
- Paid-Up Maturity Value: The total amount receivable at the end of the policy term. $$\text{Paid-Up Maturity Value} = \text{Paid-Up Sum Assured} + \text{Vested Accrued Bonuses}$$
- Special Surrender Value (SSV): The cash value if you exit today, calculated by discounting the Paid-Up Maturity Value back to the present using the 10-year G-Sec yield + 0.5% margin. $$\text{SSV} = \frac{\text{Paid-Up Maturity Value}}{(1 + \text{Discount Rate})^{\text{Remaining Term}}}$$
Section 3: Key Deciding Factors
How do you decide between the two? It depends on three critical parameters:
- Immediate Liquidity Need: If you are facing an absolute financial emergency and need cash immediately, surrendering is the only way to release cash from the policy today.
- Remaining Tenure: If you have paid premiums for 12 years of a 15-year policy, converting it to a paid-up policy is almost always superior to surrendering, as the discounting penalty is very small over the remaining 3 years.
- Value of Life Cover: Converting to paid-up keeps your life cover active (at the reduced Sum Assured). Surrendering terminates your cover immediately, exposing your family to risk.