Reviewing old policies: keep, surrender, or make paid-up?
One of the most common conversations at Dhansanchay begins with a stack of old insurance policies — some folded into envelopes, some in a locker, some remembered only when the premium reminder arrives.
"Should I keep this? Should I stop it? My father took this policy. My uncle recommended this one. I am not sure what any of them do."
The answer is never universal. It depends on the specific policy's terms, how far along it is, what its surrender value looks like, and what the family's current protection and investment needs are. But there is a framework for thinking about it.
First, check the death benefit. Is this policy providing meaningful protection relative to your HLV? If a policy has a death benefit of three lakhs and you need cover of two crores, it is not doing the protection job. It may still have value as a savings instrument — but call it what it is.
Second, check the premium-to-benefit ratio. Some older LIC policies — particularly those taken at young ages with high sum assured — have very favourable terms that are no longer available. Surrendering these to chase higher returns elsewhere may not make sense. The guaranteed additions and bonus accumulation on a well-aged policy can be surprisingly competitive.
Third, check the surrender value. If a policy has been running for many years, the surrender value may be substantial. But surrendering also means losing the death benefit, the future bonuses, and potentially creating a taxable event. Making the policy paid-up — stopping premiums but letting the policy continue with reduced benefits — is sometimes the better middle path.
Fourth — and this is the one most people miss — check whether the premium being freed up by surrendering will actually be redirected into something productive. If the freed premium will disappear into household spending, the old policy is doing more for the family than its returns suggest.
Every policy review at Dhansanchay includes this assessment. We do not have a bias towards keeping or surrendering. We have a bias towards knowing exactly what each policy does, what it costs, and whether that cost is justified by what the family gets in return.
We would rather you own less and understand more than the reverse. Use notes like this to ask better questions — not to shortcut diligence. Scheme documents, costs, and your own goals still come first. Written for general education — not as individual investment, tax, or legal advice.