LIC's New Plans with Revised Surrender Value as per IRDA Guidelines

Starting in September 2024, LIC has discontinued plans such as the New Endowment Plan (914), Jeevan Anand (915), Jeevan Labh (936), Jeevan Umang (945), among others. This decision follows the updated IRDA guidelines, which require a more transparent and reasonable calculation of the surrender value for non-linked plans, aligning it more closely with the time value of money. IRDA aims to bring greater uniformity in the calculation of surrender values across similar plans offered by all insurance providers in India.

In line with the necessary modifications mandated by IRDA, LIC has introduced a new series of non-linked plans under the 7xx series. These newly launched plans include the New Endowment Plan (714), New Jeevan Anand (715), New Jeevan Lakshya (733), and New Jeevan Umang (745).

IRDA Surrender Guidelines

Let’s take a closer look at the IRDA surrender guidelines that prompted LIC to revise its plans:

• Surrender Value Available After 1 Year of Full Premium Payment: As per the new guidelines, the surrender value becomes available after the policyholder has completed at least one full year of premium payments. This ensures that even early exits are compensated with a fair value, though it may still be less than the total premiums paid.
• Maturity Paid-up Value-Based Surrender Value: Under the new guidelines, the surrender value is calculated based on the maturity paid-up value, ensuring that policyholders receive a fair return when they choose to exit the policy before maturity.
• Present Value Concept: The guidelines emphasize the importance of the present value concept, where the future payout is discounted to reflect its current worth. This ensures that the surrender value reflects the time value of money, offering a more reasonable and transparent calculation.
• 10-Year Government Security Benchmark Rate: The surrender value is now influenced by the 10-year government security benchmark rate, which helps standardize and stabilize the calculation of surrender values across different plans.

LIC’s New Plan Changes

In line with the above points, LIC has introduced the following key changes in its new plans:

• Guaranteed Surrender Value (GSV) After 1 Year: Policyholders will be eligible for a guaranteed surrender value after completing one full year of premium payments.
• Special Surrender Value (SSV) After 2 Years: A special surrender value will be available after two years of full premium payments, providing greater flexibility for policyholders looking to exit early.
• SSV Factors: The calculation of the special surrender value will be based on specific SSV factors, which determine the amount payable to the policyholder.
• Yearly Revisable Factors: These SSV factors will be subject to annual revisions, ensuring that the surrender value stays aligned with current financial conditions and market rates.