SSY vs LIC Endowment Calculator — FY 2025-26

Q: Why does SSY give so much more than LIC endowment on the same premium?

Two reasons: (1) SSY earns 8.2% on your entire deposit from day one, while LIC endowment's effective IRR is only 4.5–5.5% after deducting agent commission (25–35% year 1), mortality charges, and fund management fees. (2) In SSY, 100% of your ₹1,50,000 earns interest. In LIC, a significant portion goes to distribution costs. Over 21 years, even a 3% difference compounds to lakhs — SSY gives ₹18–19 lakh more on ₹1.5L/year.

Q: Is it fair to compare SSY and LIC since LIC gives life cover?

A direct comparison is not apples-to-apples. The fair comparison is SSY + term insurance vs LIC endowment. Adding a ₹50 lakh term policy costs just ₹2,500–5,000/year, and the SSY combo still gives significantly more maturity value AND 3–5x higher life cover than LIC's sum assured. The principle: keep insurance and investment separate.

Q: I already have an LIC endowment. Should I surrender it?

It depends on how far in you are. Years 1–2: zero surrender value, do NOT surrender. Years 3–7: surrender value is 30–50% of premiums paid — significant loss, but opportunity cost of continuing at ~5% vs 8.2% may justify switching. Years 8+: surrender value improves to 60–80%, switching usually makes sense unless close to maturity. Focus on future returns, not sunk costs.

Q: What is the actual IRR of LIC endowment plans?

Independent analyses show LIC endowment IRR of 4.5–5.5%. This includes sum assured, reversionary bonus (₹48–52 per ₹1,000 SA per year), Final Additional Bonus, and loyalty additions. Jeevan Lakshya (T933) is ~5–5.5%, New Endowment (T914) is ~4.5–5%. The effective return on premiums paid is what matters, not the bonus rate per ₹1,000 SA.

Q: What are the tax implications of surrendering an LIC policy?

If you surrender before 5 years, Section 80C deductions claimed earlier are reversed and added to your income. Surrender value is taxable as Income from Other Sources. After 5 years, if premium ≤ 10% of sum assured, surrender proceeds are exempt under Section 10(10D). SSY maturity is always fully tax-free under EEE.

Compare Sukanya Samriddhi Yojana (8.2% EEE) with LIC endowment plans (Jeevan Lakshya, New Endowment — ~5% effective IRR). See why SSY + term insurance beats LIC endowment on both returns AND life cover. Analyse surrender value if you already have LIC. Based on Q4 FY 2025-26 SSY rate and current LIC bonus declarations.

Compare SSY at 8.2% with LIC endowment at ~5% IRR on the same annual investment

Annual investment

₹

Same amount for both. SSY max \u20B91,50,000/year.

LIC policy term

Common terms: 15, 18, 20, 21, 25 years

SSY interest rate

% p.a.

Current: 8.2% (Q4 FY 2025-26)

LIC endowment effective IRR

Typical 4.5\u20135.5%. Includes bonus, net of charges.

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How to Use This Calculator

Returns Comparison tab

Enter your annual investment amount (default ₹1,50,000 — the SSY maximum). The calculator compares SSY at 8.2% compounded annually for 21 years against an LIC endowment plan at ~5% effective IRR. Both use the same annual outflow. Adjust the LIC policy term (15–25 years) and effective IRR in "More options" to match your specific plan.

Insurance Angle tab

LIC endowment includes life cover; SSY does not. This tab creates a fair apples-to-apples comparison: SSY + pure term insurance vs LIC endowment alone. Enter your total annual budget, desired term cover amount, and LIC sum assured. The calculator deducts the term premium from your budget, invests the rest in SSY, and compares both maturity values AND life cover amounts.

Already Have LIC? tab

If you already hold an LIC endowment policy and are wondering whether to surrender it, this tab analyses the opportunity cost of continuing vs switching to SSY. Enter your years into the policy, annual premium, sum assured, and remaining years. The calculator estimates your surrender value (guaranteed + special), projects future LIC maturity vs SSY maturity, and recommends whether to switch or continue.

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SSY vs LIC Endowment — Key Facts at a Glance

SSY interest rate (Q4 FY 2025-26)8.2% p.a. compounded annually

LIC endowment effective IRR4.5–5.5% (after all charges)

SSY deposit period15 years (interest continues to year 21)

SSY tax statusEEE — fully tax-free

LIC tax status80C deduction + 10(10D) maturity exemption

SSY life coverNone — add term insurance separately

LIC endowment life coverSum assured (typically 7–10x premium)

LIC surrender (years 1-2)Nil — zero surrender value

LIC surrender (years 3-7)30–50% of premiums paid

LIC agent commission (year 1)25–35% of first year premium

Why LIC Endowment Returns Are Only ~5%

Where your LIC premium goes:
Agent commission: 25–35% of first year premium, 5–7.5% of renewal premiums. This is the single largest cost drag. On a ₹1,00,000 premium, ₹25,000–35,000 goes to the agent in year 1.

Mortality charges: Cost of providing life cover (sum assured). Higher for older policyholders. Deducted from your premium before investment.

Fund management charges: LIC's expense ratio for managing the participating fund. Regulated by IRDAI but still reduces returns.

Profit sharing: LIC retains up to 5% of surplus (after the 2024 IRDAI regulations, insurers can retain up to 10%). Policyholders get 90–95% of surplus as bonus.

Net effect: Out of ₹1,00,000 premium, only ₹55,000–65,000 actually gets invested in the participating fund. This invested portion earns ~8–9% on government securities, but your effective return on the full premium is only 4.5–5.5%.

SSY, by contrast, has zero commission, zero fund management charge, and zero mortality deduction. The entire ₹1,50,000 earns 8.2% from day one.

The Formula

SSY Maturity Value:
Years 1–15: Balance = Previous Balance + Annual Deposit; Interest = Balance × 8.2%
Years 16–21: No deposits, interest on existing balance only
Maturity = Balance after 21 years of compounding

LIC Endowment Maturity (approximate):
Maturity = Sum Assured + Accrued Reversionary Bonus + Final Additional Bonus
Reversionary Bonus ≈ ₹48–52 per ₹1,000 SA per year (compounding simple, vested annually)
FAB ≈ ₹20–30 per ₹1,000 SA (one-time at maturity)
Effective IRR on total premiums paid ≈ 4.5–5.5%

Surrender Value:
GSV = Surrender Value Factor × (Total Premiums Paid − First Year Premium)
SSV = GSV + (Accrued Bonus × Bonus Surrender Factor)
LIC pays higher of GSV and SSV

Example

Meera — ₹1,50,000/year budget, comparing SSY vs LIC Jeevan Lakshya for her 4-year-old daughter

Scenario 1: Pure Returns (Tab 1)

Annual investment₹1,50,000

SSY maturity (21 years, 8.2%)₹71,82,127

LIC maturity (21 years, ~5% IRR)₹53,16,413

SSY advantage₹18,65,714 more

SSY money multiple3.19x on deposits

LIC money multiple2.36x on premiums

Scenario 2: SSY + Term vs LIC Endowment (Tab 2)

Budget₹1,50,000/year

Term cover (₹50L, age 30)₹2,750/year premium

SSY deposit after term₹1,47,250/year

SSY + term maturity₹70,50,248 + ₹50L cover

LIC endowment maturity₹53,16,413 + ₹15L cover

Verdict₹17.34L more money AND ₹35L more cover

The separation principle wins: Keep insurance (term) and investment (SSY) separate. You get more money at maturity AND higher life cover for a fraction of the LIC premium.

Current LIC Bonus Rates (FY 2024-25 Declared)

Reversionary Bonus — Major Endowment Plans

Jeevan Lakshya (Table 933)₹52 per ₹1,000 SA

New Endowment (Table 914)₹48 per ₹1,000 SA

Jeevan Anand (Table 915)₹50 per ₹1,000 SA

New Jeevan Anand (Table 815)₹46 per ₹1,000 SA

Jeevan Labh (Table 936)₹55 per ₹1,000 SA

Final Additional Bonus (FAB): ₹20–30 per ₹1,000 SA (one-time at maturity). These are declared rates for policies maturing in FY 2024-25. Bonus is not guaranteed for future years. Source: LIC Annual Report 2024-25.

FAQ

Why does SSY give so much more than LIC endowment on the same premium? ▼

Two reasons: (1) Higher effective rate — SSY earns 8.2% on your entire deposit from day one, while LIC endowment's effective IRR is only 4.5–5.5% after deducting agent commission (25–35% year 1), mortality charges, and fund management fees. (2) Zero leakage — in SSY, 100% of your ₹1,50,000 earns interest. In LIC, a significant portion goes to distribution costs before it ever gets invested. Over 21 years, even a 3% difference compounds to lakhs.

Is it fair to compare SSY and LIC since LIC gives life cover? ▼

No, a direct comparison is not apples-to-apples because LIC endowment bundles life insurance. The fair comparison is: SSY + term insurance vs LIC endowment. When you add a ₹50 lakh term policy (costing just ₹2,500–5,000/year), the SSY combo still gives significantly more maturity value AND provides 3–5x higher life cover than the LIC endowment's sum assured. The "Insurance Angle" tab in our calculator does exactly this comparison. The financial planning principle is: keep insurance and investment separate.

I already have an LIC endowment. Should I surrender it? ▼

It depends on how far into the policy you are. Years 1–2: Do NOT surrender — you get zero surrender value. Consider making it paid-up instead. Years 3–7: Surrender value is only 30–50% of premiums paid, so there is a significant loss, but the opportunity cost of continuing at ~5% instead of 8.2% may make switching worthwhile. Years 8+: Surrender value improves (60–80%+ of premiums), and switching to SSY usually makes sense unless you are close to maturity. Use the "Already Have LIC?" tab with your exact policy details. Key principle: ignore sunk costs — focus only on what earns more going forward.

What are the tax implications of surrendering an LIC policy? ▼

If you surrender an LIC policy before completing 5 years (or before paying premiums for 2 years if the policy term is less than 10 years), the Section 80C deductions claimed earlier will be reversed and added to your income in the year of surrender under Section 80C(2). The surrender value itself is taxable as "Income from Other Sources." After 5 years, if annual premium is ≤ 10% of sum assured, the surrender proceeds are exempt under Section 10(10D). SSY maturity is always fully tax-free under EEE status.

What is the actual IRR of LIC endowment plans — is 5% correct? ▼

Independent analyses by financial advisors (freefincal.com, subramoney.com, Capitalmind) consistently show LIC endowment plan IRR in the 4.5–5.5% range. This factors in: (1) sum assured, (2) accrued reversionary bonus (₹48–52/₹1,000 SA/year), (3) Final Additional Bonus at maturity, and (4) any loyalty additions. The IRR varies by plan — Jeevan Lakshya (T933) tends toward 5–5.5%, New Endowment (T914) is closer to 4.5–5%. LIC's published returns look higher because they quote bonus rate per ₹1,000 SA, which is misleading when your premium is much higher than the per-unit cost of sum assured. The effective return on premiums paid is what matters, and that is 4.5–5.5%.

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