LIC Policy Return (IRR) Calculator

What return do LIC savings plans actually give?

It is the question almost no agent answers straight: if you pay premiums for 15–20 years and get a lump sum at the end, what is that as an annual return? The honest number is called the IRR (internal rate of return), and for most traditional LIC plans it lands between roughly 4% and 6% a year — below a bank FD, below PPF, and far below what equity has delivered over long periods. That is not a scandal; it is simply what a product that bundles guaranteed life cover with cautious, mostly-debt investment can pay. The problem is only when it is sold as a “great investment.” Use the calculator above with your own policy’s numbers to see your real figure.

Why the return is lower than the “sum assured + bonus” makes it look

Three things quietly pull the real return down. First, a slice of every premium pays for your life cover and the insurer’s expenses, so not all of your money is invested. Second, LIC’s reversionary bonus is “simple”, not compounding — a bonus of, say, ₹49 per ₹1,000 is calculated on the original sum assured every year, not on a growing balance, so its effective yield shrinks over time. Third, those bonuses are declared each year and are not guaranteed; the big maturity figure in an illustration is a projection, not a promise.

How to read your LIC benefit illustration

Every LIC savings-plan illustration shows two columns, usually headed 4% and 8%. These are not the returns you get — they are the assumed gross rates the fund might earn, mandated by the regulator for comparison. Your actual pocketed return (the IRR) is always lower than the assumed rate because of the costs above. As a rule of thumb, the realistic outcome sits much closer to the 4% column than the 8% one. Put the 4%-column maturity into the calculator for an honest picture.

Three worked examples

Endowment (New Endowment 714): pay ₹20,000 a year for 20 years (₹4,00,000 total) and receive around ₹6,40,000 at maturity → an IRR of roughly 4.3% a year. Safe, but a 5-year FD would have done the same with full liquidity.

Whole-life (Jeevan Umang 745): premiums for 15 years, then 8% of sum assured paid back every year for life plus a lump sum at the end. Depending on entry age, the lifetime IRR typically works out to about 5–5.5% — a steady, guarantee-backed income stream rather than a wealth builder.

Money-back (New Money-Back 20 / 25): because you get chunks back during the term, the effective IRR is usually around 4–5%. The early payouts feel nice but cost you growth, since that money leaves the plan instead of compounding.

The guaranteed plans are the exception — a bit

Newer non-participating plans — New Bima Jyoti (890), Nav Jeevan Shree (912) and Bima Platinum (770) — replace uncertain bonuses with guaranteed additions. That makes their maturity (and therefore their IRR) known in advance, which is genuinely useful. The catch: the guaranteed IRR is still usually in the 4.5–5.5% range. You are buying certainty, not a higher return.

The honest takeaway

None of this means LIC plans are “bad” — they are low-risk, guarantee-backed, and enforce savings discipline, which suits some people. It only means you should know the number before you commit. For most families the stronger approach is to separate the two jobs: buy cheap, large life cover through a term plan, and grow your money separately in PPF, index funds or similar — then use a guaranteed plan only for the portion that must stay completely safe. Not sure what fits you? Start with Plan Banao, or see the real cost of exiting early on the Surrender Value Calculator.

This tool does the maths only on the figures you enter; it does not predict LIC bonuses or guarantee any outcome. For participating plans, maturity is not guaranteed — always use your official LIC benefit illustration. Educational information, not individual financial advice. BimaJaano is independent and not affiliated with LIC or IRDAI.