Saturday, February 21, 2009

How to calculate Surrender value, Loan Value of an LIC policy ?

In order to find a surrender value of a LIC Policy, first you need to find out is PAID UP Value.

PAID up Value = [No of years premium paid * S.A /Policy Term] + [Bonus * S.A/1000]

where S.A = Sum Assured

Example: from LIC Wings Ready Reckoner book, Mr. A has taken an Endowment policy of 30 years term on 15.7.1983 for S.A of 2 lakhs and has paid premium upto date till 15.7.2007 i.e 25 years. Now he wants to know how much is the surrender value.

First let us find out the Paid up value by using the above formula
Paid up value = [25 * 2,00,000/ 30] + [ 1583 * 2,00,000/1000] = [ 166667 + 316600]=4,83,267
* Bonus is given from the bonus chart of LIC for 25 years Endowment plan
* Most of the people would get a reminder from LIC with details of your bonus , you can just put the total bonus amount in the second part of above formula or you can also call up 1251 from MTNL or BSNL and get the bonus information by just entering the policy number.

SURRENDER VALUE = Surrender value factor * Paid up value /100

for above example surrender value factor from lic chart is 65.84 so substituting we get
Surrender value = 65.84 * 4,83,267 / 100 = 3,18,183

Loan Value = 90% of Surrender Value (approximate)
In above case you can get loan of up 90% of 318183 = 2,86,365

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