Policy Reality Check
What your LIC / endowment / ULIP policy actually returns per year
Reviewed by the PaisaTools Editorial Team · Last reviewed September 2026
How to use: Enter the premium you pay, how long you pay it, the policy term and the maturity amount — the true annual return appears instantly.
Example₹50,000/year for 20 years → ₹20 lakh at maturity is a 6.2% return, below a bank FD
Your income-tax slab
Needed for a fair comparison — policy maturity is usually tax-free, but FD interest is taxed.
Your policy's actual return
6.22%
Reasonable
This is at the better end for a traditional policy. Still compare it against term cover plus a separate investment.
You pay in
₹10,00,000
You get back
₹20,00,000
Maturity is tax-free under §10(10D), so this is worth the same as a 8.88% FD before tax at your 30% slab. That's the fair way to read it.
After ~6% inflation that's a real return of 0.22% a year — what your money actually gains in buying power.
The same premiums, invested instead — after tax
- Bank FD (4.9%)7% taxed at 30% → 4.90% net₹17.16L
- PPF (7.1%)7.1%, fully tax-free (EEE)₹22.19L+₹2.19L
- Index fund / equity SIP (12%)12% less 12.5% LTCG above ₹1.25L₹36.71L+₹16.71L
The fair comparison
A policy bundles cover with investment, so comparing it to a pure SIP isn't quite fair. Here's the like-for-like: buy the same ₹10L cover as term insurance (about ₹550/year) and invest what's left.
Invest ₹49,450/year → ₹39.91L at maturity, with the same life cover throughout.
Runs entirely in your browser — nothing is uploaded. Term-premium figures are indicative; your real quote depends on age and health. Don't surrender a policy on this alone — check surrender value and your cover needs first.
Millions of Indians hold an endowment, money-back or ULIP policy that was sold as an investment. The brochure shows a big maturity number, so it feels like a good deal. But a maturity amount isn't a return — and almost nobody is ever shown the actual annualised rate.
That number is the IRR. It accounts for the fact that you pay premiums over 15 or 20 years, so your earliest rupee compounds for two decades while your last one compounds for months. Once the timing is accounted for, most traditional policies land around 4-6% a year — under a bank FD, and roughly level with inflation. Your money grows on paper while barely holding its buying power.
This isn't an argument against insurance — it's an argument against buying insurance and investment welded together. A term plan buys the same life cover for a fraction of the premium; the difference, invested separately, is what actually builds wealth. This tool shows both, using your own numbers.
The return is computed as an internal rate of return (IRR) over the exact cash-flow series you enter — each annual premium as an outflow on its own date, any survival benefits during the term, and the maturity amount at the end — solved numerically so irregular money-back schedules are handled correctly. Comparisons use 7% (typical bank FD), 7.1% (the government-notified PPF rate) and 12% (the standard long-run assumption for diversified Indian equity, not a guarantee). Real return subtracts ~6% long-term Indian inflation. Term-insurance premiums are indicative estimates and are set deliberately on the higher side so the comparison never flatters the alternative.
- Uses the figures you enter from the policy illustration.
- Illustrated bonuses/returns are not guaranteed.
- What return do LIC endowment policies actually give?
- Traditional endowment and money-back policies typically return about 4-6% a year once you account for every premium you paid and when you paid it. The maturity amount looks large because it accumulates over 15-20 years, but the annualised return is usually below a bank FD and close to (or below) inflation.
- Why is my policy's return so much lower than the maturity amount suggests?
- Because the brochure compares a total to a total. You don't pay the full premium on day one — you pay it over 15-20 years, so most rupees are invested for far less time than the headline term. The IRR accounts for the timing of every payment, which is why it's the honest number.
- What is IRR and why does it matter here?
- IRR (internal rate of return) is the single annual rate that makes all your payments and receipts balance out. It's the only fair way to compare a policy — with premiums spread over years and payouts at different times — against an FD or a SIP.
- Should I surrender my policy if the return is poor?
- Not automatically. Surrendering early often means a significant loss, and you'd give up the life cover. Check the surrender value, confirm you have adequate term cover in place first, and weigh how many years remain. This tool tells you what the policy is earning — the decision needs your full picture.
- Is 'term insurance + invest the rest' really better?
- Usually, on the numbers — term cover costs a fraction of an endowment premium for the same sum assured, and the difference invested in an index fund has historically compounded far faster. The trade-off is that you take market risk, and a term plan pays nothing back if you survive the term. It buys protection, not returns.
Related guides
- What to do with extra money: the right orderSave it, clear debt, or invest? There is an order that builds wealth fastest, and the reasoning for each step is what makes it stick.
- Simple vs compound interest: the difference explainedOne is charged on your original amount; the other earns interest on your interest. Over years the gap becomes enormous. Where you meet each.
- How much SIP do you need to reach ₹1 crore?The monthly SIP that grows to ₹1 crore — for 10, 15, 20 and 25 years — and why starting early does most of the work.