LIC Policy Return Calculator
Measure the absolute mathematical yield of your life insurance policy. Easily solve the compound annual growth rate (CAGR) and Internal Rate of Return (IRR) for custom existing policies or model flagship LIC traditional savings plans.
Select Return Calculation Mode
Solve existing manual policies or project default flagship LIC actuarial models.
Add any survival benefits paid back to you during the policy years.
Used to compute Net Post-Tax CAGR and bank FD equivalent tax rate conversions.
Section 10(10D) Tax Compliance: Active Shield
Excellent! Sum Assured (₹5,00,000) is at least 10x the annualized premium (₹50,000). ALL survival benefits and maturity benefits are 100% tax-free.
Internal Rate of Return (IRR)
9.17% p.a.
True compound annual growth (CAGR)
Net Post-Tax IRR
9.17% p.a.
Slab Rate: 30%
FD-Equivalent Yield
13.10% p.a.
Pre-tax FD rate required
Total Outflow (Premiums)
₹5,00,000
Over PPT of 10 years
Total Nominal Returns
₹11,50,000
Survival + Maturity value
Competitor Yield Comparison Matrix
LIC Policy (This Model)
Tax-Free | Insurance Cover: Vested Varies
9.17% p.a.
Net Yield
Bank Fixed Deposit (FD)
Fully Taxable | Insurance Cover: None (0)
4.55% p.a.
Net Yield
Public Provident Fund (PPF)
Tax-Free (1.5L cap) | Insurance Cover: None (0)
7.10% p.a.
Net Yield
ELSS Mutual Funds (10y avg)
LTCG Taxed @ 12.5% | Insurance Cover: None (0)
10.50% p.a.
Net Yield
Policy Inception
First premium payment completed and active life cover begins immediately.
| Policy Year | Premium Paid (-) | Cumulative Outflow | Survival Money Back (+) | Dynamic Death Cover | Maturity Returns (+) | Net Cash Flow |
|---|---|---|---|---|---|---|
| Year 1 | ₹50,000 | ₹50,000 | — | ₹5,05,000 | — | ₹-50,000 |
| Year 2 | ₹50,000 | ₹1,00,000 | — | ₹5,10,000 | — | ₹-50,000 |
| Year 3 | ₹50,000 | ₹1,50,000 | — | ₹5,15,000 | — | ₹-50,000 |
| Year 4 | ₹50,000 | ₹2,00,000 | — | ₹5,20,000 | — | ₹-50,000 |
| Year 5 | ₹50,000 | ₹2,50,000 | ₹75,000 | ₹5,25,000 | — | +₹25,000 |
| Year 6 | ₹50,000 | ₹3,00,000 | — | ₹5,30,000 | — | ₹-50,000 |
| Year 7 | ₹50,000 | ₹3,50,000 | — | ₹5,35,000 | — | ₹-50,000 |
| Year 8 | ₹50,000 | ₹4,00,000 | — | ₹5,40,000 | — | ₹-50,000 |
| Year 9 | ₹50,000 | ₹4,50,000 | — | ₹5,45,000 | — | ₹-50,000 |
| Year 10 | ₹50,000 | ₹5,00,000 | ₹75,000 | ₹5,50,000 | — | +₹25,000 |
| Year 11 | — | ₹5,00,000 | — | ₹5,00,000 | — | ₹0 |
| Year 12 | — | ₹5,00,000 | — | ₹5,00,000 | — | ₹0 |
| Year 13 | — | ₹5,00,000 | — | ₹5,00,000 | — | ₹0 |
| Year 14 | — | ₹5,00,000 | — | ₹5,00,000 | — | ₹0 |
| Year 15 | — | ₹5,00,000 | — | ₹5,00,000 | ₹10,00,000 | +₹10,00,000 |
Simple Interest Returns vs. Compound CAGR
A very common sales tactic is presenting policy returns as a cumulative nominal percentage. For example: *"Pay ₹50,000 annually for 10 years (Total ₹5 Lakhs) and get ₹10 Lakhs maturity in 20 years — a 100% total profit return!"*
While a 100% simple return sounds spectacular, it fails to account for the time value of money. Compounded annually over 20 years, a ₹5 Lakh outflow spread across a decade that turns into a ₹10 Lakh lump-sum matures to an actual **CAGR of only ~4.8% p.a.**
Our return solver removes nominal bias and applies standard time-weighted cash flow formulas to calculate the exact compound annual rate of interest you earn on every rupee invested.
Actuarial Cash Flow Solving Logic (IRR)
Endowment plans have linear timelines: annual premium outflows for $N$ years, followed by a final maturity benefit at year $T$. However, Money Back (Plan 920/921) or Whole-Life (Plan 945) plans involve intermediate inflows (Survival benefits, guaranteed additions, annual cash bonuses).
To solve for the CAGR of policies with multi-period inputs and outputs, a single formula does not suffice. We must calculate the **Internal Rate of Return (IRR)**, which is the interest rate $r$ that solves the Net Present Value equation:
Using a high-performance numerical secant method solver, our engine iteratively resolves this polynomial in real-time, accounting for the exact years you received your survival money back payouts.
Sovereign Section 10(10D) & Slab Rate Audits
The biggest USP of traditional LIC plans is that their returns are protected by a sovereign tax shield:
- Section 80C: Premiums paid are eligible for a tax deduction up to ₹1.5 Lakhs annually under current standard regimes.
- Section 10(10D): All payouts, including survival money back and final maturity benefits, are **100% tax-free** in the hands of the policyholder.
- The 10x Sum Assured Rule: To claim this tax-free shield, the basic Sum Assured of your policy must be at least **10 times** the annual premium paid. If it falls below this ratio, the net policy gains are taxable under regular income tax slabs.
Why the FD-Equivalent Yield Matters
Comparing a tax-free traditional insurance yield to a taxable instrument (like a Bank Fixed Deposit) is not a fair comparison on raw CAGR numbers. Since FD interest is fully taxable every year at your income slab rate, a taxable return is eroded.
To match a tax-free LIC IRR of **6.0%**, a policyholder in the **30% tax bracket** would actually need to find a taxable Fixed Deposit that pays:
Finding a bank FD that guarantees a secure 8.57% pre-tax annual return is highly challenging. In this manner, our calculator models the exact FD-equivalent taxable yield to reveal the true financial value of your policy.
Guidelines to Maximize LIC Yields
1. Annual Payment Discount
LIC offers a **2% rebate** on tabular premiums for choosing Yearly modes, and **1% rebate** for Half-Yearly. Quarterly and Monthly modes are loaded with interest. Always select Yearly to maximize IRR.
2. Settle for High Sum Assured
Traditional plans offer high Sum Assured rebates (reductions in premium rates per ₹1,000 SA) for policies exceeding ₹5 Lakhs or ₹10 Lakhs. Selecting larger covers naturally lowers the price per unit, enhancing CAGR.
3. Mind the Surrender Claws
Traditional policies only acquire a Surrender Value after 2 full premium years. Surrendering early results in severe losses (recovering only 30-50% of premium). Hold to maturity to secure full bonuses and FAB additions.
LIC Policy Return Calculator: Frequently Asked Questions
What is the typical Internal Rate of Return (IRR) of an LIC policy?
LIC traditional endowment or money-back policies (like Plan 914, Plan 915, Plan 920) typically deliver a net post-tax IRR (compound yield) ranging between 4.5% to 6.2% per annum, depending on the chosen policy term and age at entry. Longer policy terms (20 to 25+ years) generally yield higher returns because they allow annual reversionary bonuses to accumulate longer, and qualify for high Final Additional Bonuses (FAB).
What is the difference between simple rate of return and IRR/CAGR?
Simple rate of return simply divides your absolute profits by total invested capital. It ignores when the cash flows occurred. Compound Annual Growth Rate (CAGR) and IRR account for the exact timing of cash flows (premium outflows paid over 10-20 years and survival benefits paid out periodically). IRR is the only mathematically correct standard to compare LIC policies with bank Fixed Deposits, PPF, or mutual funds.
Why does the calculator require my income tax bracket slab rate?
LIC traditional policy payouts are 100% tax-exempt under Section 10(10D). If you compare a tax-free policy return to a taxable bank Fixed Deposit, you must compare them on a post-tax basis. Entering your slab rate allows our solver to compute the taxable FD-equivalent rate, which represents the yield a taxable instrument must offer to match the policy's net tax-free returns.
Are the survival benefits under LIC Money Back plans taxable?
No, survival benefits (money-back payouts received every 5 years) are fully tax-exempt under Section 10(10D), provided the policy meets the 10x Sum Assured compliance audit (i.e. the basic Sum Assured is at least 10 times the annual premium).
How does the Final Additional Bonus (FAB) affect my returns?
The Final Additional Bonus (FAB) is a one-time lump-sum bonus paid upon maturity or death, in addition to the annual reversionary bonuses. FAB rates scale up exponentially for longer policy terms. For instance, a 25-year term has a significantly higher FAB rate per ₹1,000 SA than a 15-year term, which is why longer policies yield superior CAGR profiles.
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