How LIC Maturity Amount is Calculated
LIC traditional plans (Endowment, Jeevan Anand, Money-Back) are participating plans - they share in LIC's profits through annual bonuses. The maturity amount has three components:
Maturity Amount = Sum Assured + Simple Reversionary Bonus (SRB) + Final Additional Bonus (FAB)
SRB = Bonus Rate (₹/1000 SA) x (Sum Assured ÷ 1000) x Policy Term
FAB = FAB Rate (₹/1000 SA) x (Sum Assured ÷ 1000)
(one-time at maturity, for policies >= 15 years)
Net Gain = Maturity Amount − Total Premium Paid
CAGR = (Maturity ÷ Total Premium)^(1÷Term) − 1
LIC Plan Types Explained
New Endowment Plan (914) - The most common LIC plan. Pays Sum Assured + bonuses at maturity or death. Premium paid for the full policy term. Best for pure savings-cum-insurance.
Jeevan Anand (915) - Similar to Endowment but provides life cover even after maturity (whole life cover). Slightly lower bonus rate than Endowment. Suitable if you want lifelong protection.
New Money Back 20yr (920) - Pays 20% of SA as survival benefit at years 5, 10, 15, plus remaining 40% + full bonuses at year 20. Good for periodic liquidity needs.
New Money Back 25yr (921) - Pays 15% of SA at years 5, 10, 15, 20, plus 40% + full bonuses at year 25. Longer lock-in, better total returns.
Jeevan Labh (936) - Limited premium payment plan. Premiums paid for 16–25 years but policy continues for 25–40 years. Higher total bonus accumulation due to extended term.
LIC Bonus Rates (FY 2023–24, indicative)
LIC declares bonus rates each financial year based on its actuarial experience. Recent rates for popular plans:
New Endowment (914):
15-yr term → ₹50/1000 SA/yr | FAB ₹355/1000
20-yr term → ₹50/1000 SA/yr | FAB ₹580/1000
25-yr term → ₹50/1000 SA/yr | FAB ₹870/1000
Jeevan Anand (915):
15-yr term → ₹48/1000 SA/yr | FAB ₹310/1000
20-yr term → ₹48/1000 SA/yr | FAB ₹500/1000
Money Back 20yr (920):
20-yr term → ₹50/1000 SA/yr | FAB ₹400/1000
Note: Actual rates are subject to annual revision by LIC.
Always verify with your LIC agent or policy bond.
Is LIC a Good Investment?
LIC traditional plans typically deliver 4%–6% effective CAGR on total premiums paid - lower than equity mutual funds but with guaranteed Sum Assured as insurance cover. They are most valuable for:
1. Life insurance protection - Sum Assured is guaranteed on death, providing family security.
2. Forced savings discipline - Annual premiums enforce long-term saving habits.
3. Tax benefits - Section 80C deduction on premiums (up to ₹1.5L) and Section 10(10D) maturity proceeds are tax-free (subject to premium-to-SA ratio rules).
However, for pure wealth creation, a term insurance + SIP combination typically far outperforms bundled insurance-investment plans. Use this calculator to compare your LIC returns against equivalent SIP returns using our SIP Calculator.
Frequently Asked Questions
What is Simple Reversionary Bonus (SRB)?
Simple Reversionary Bonus (SRB) is a yearly bonus declared by LIC as a fixed amount per ₹1000 of Sum Assured. Unlike compound bonuses, it is calculated only on the Sum Assured (not on accumulated bonuses), hence "simple." It accrues each year and is paid at maturity or death claim. For a ₹10L SA policy with ₹50/1000 bonus rate for 20 years: SRB = 50 x (10,00,000/1000) x 20 = ₹10,00,000.
What is Final Additional Bonus (FAB) in LIC?
Final Additional Bonus (FAB) is a one-time special bonus paid at maturity or death for policies that have been in force for 15 or more years. It is declared as a fixed amount per ₹1000 of Sum Assured. FAB rewards long-term policyholders and increases significantly with policy term - a 25-year policy gets a much higher FAB than a 15-year policy. It is in addition to all accrued SRB.
Is LIC maturity amount tax-free?
Yes, in most cases. Under Section 10(10D) of the Income Tax Act, LIC maturity proceeds are tax-free if the annual premium does not exceed 10% of the Sum Assured (for policies issued after April 1, 2012). However, as per Budget 2023, if the aggregate annual premium across all life insurance policies (excluding ULIPs) exceeds ₹5 lakh, the excess maturity amount becomes taxable. Always consult a tax advisor for your specific situation.
What happens if I surrender my LIC policy early?
Surrendering before completing 3 years results in zero surrender value - all premiums paid are forfeited. After 3 years, the policy acquires a Guaranteed Surrender Value (GSV) = 30% of all premiums paid (excluding first year's premium and any riders). The Special Surrender Value (SSV) may be higher. Early surrender typically results in a loss compared to total premiums paid. It is almost never financially beneficial to surrender a traditional LIC plan before maturity.
How does Money Back plan differ from Endowment?
An Endowment plan pays the full maturity benefit (SA + bonuses) only at the end of the policy term or on death. A Money Back plan pays periodic survival benefits (20%–15% of SA) at specified intervals during the policy term, providing liquidity. The remaining SA + full bonuses are paid at maturity. Total payout is higher with Money Back, but since part of SA is paid earlier, effective returns are slightly lower than Endowment for the same term and SA.
What is the CAGR return on LIC policies?
LIC traditional plans typically deliver 4%-6% effective CAGR depending on the plan, term, and current bonus rates. This is lower than equity mutual funds (10-14% CAGR) but provides guaranteed Sum Assured plus bonus component, making them suitable as a conservative insurance-cum-savings product.
