The surrender value of a Policy is the amount that should be payable to you, if you choose to opt out of the Insurance plan provided you paid the policies for a minimum of 3 years towards LIC. If the policy you want to surrender is a participating policy (reversionary Bonus), you should also get a bonus, the amount of which will be decided according to the situation.
Surrender value is different for different plans and it also depends on your previous premium payment.
For example, let’s take some of the LIC’s famous insurance plans:
In LIC’s Jeevan Anand (Endowment assurance plan), the Guaranteed surrender value is 30% of the basic premiums paid till date excluding the first years payment. Also if any extra premium is paid towards Accident benefit, it will also be excluded.
In LIC’s money back policy (with profit), the Guaranteed surrender value is 30% of the basic premium paid excluding the first years payment and all survival benefits paid earlier.
In LIC’s Komal Jeevan children’s plan the guaranteed surrender value is 90% of the total premiums paid till date excluding first year’s premium and any extra premium paid provided the surrender is put forward before the commencement of risk.
After the commencement of risk the guaranteed surrender value is 90% of premium paid before risk commencement excluding first year’s payment and any extra premiums paid plus 30% of premiums paid after the date of commencement of the risk.
So from the above examples it is very clear that Surrendering of a policy is strictly not recommended since the surrender value is very less compared to the total of the premiums paid by you. Also note that the surrender value increases with increase in the number of policies paid by you (that is to say that you stay in the policy for more years).
In general the surrender value that will be payable to you will either be equal or more than the Guaranteed surrender value, that is in case you have completed atleast 3 years of premium payment. For most policies, strictly, you will not be paid any surrender value immediately if you surrender it with in 3 years (fir example, if you wish to surrender it only after 1 year into the policy term). The amount will be payable only after 3 years of policy commencement. In this period, the policy will be in lapsed state and doesn’t accrue any benefits from LIC (nor any deductions will be made). Once 3 years gets completed, LIC will pay you the applicable surrender amount.
Note: If you have paid 3 years premium and you want to surrender you policy, you can know the rough surrender amount by seeing the surrender clause in your policy bond. To know exact value, you have to contact LIC.