What Does Your Insurance Policy Actually Return?
A policy that pays back several times your premiums can still return very little a year, because the maturity figure is never annualised. Enter your premium and maturity amount to see the real rate — and what the same money would have done in PPF, or in term insurance plus a fund.
This tool is arithmetic on the numbers you enter — it is education only, not investment advice, and not a recommendation about any policy.
Your policy
The figure on the benefit illustration, including bonuses.
Used to price equivalent term cover: about ₹950 a year.
For the "term insurance + invest the rest" comparison. Not guaranteed.
Your policy's actual return
6.22%
a year, on ₹10,00,000 of premiums
Your money grows 2.0× — but over 20 years that is only 6.22% a year.
Below PPF. The same premiums in PPF at 7.1% would give ₹22.19 L instead of ₹20.00 L — with a government guarantee.
Same premiums, three routes
₹50,000 a year for 20 years, valued at year 20.
The third route keeps the same ₹10.00 L cover through term insurance at about ₹950 a year, investing the remaining ₹49,050.
A policy that returns your premiums several times over still has a modest annual return once the years are counted. The comparison that matters is not "how much do I get back" but what the same money would have done elsewhere, while keeping the same life cover.
Estimates only. Assumes level annual premiums paid at the start of each year and a single maturity payout; it excludes riders, loyalty additions, surrender values and any tax on maturity. Term premiums vary with age, health and insurer. Fund returns are not guaranteed. This is arithmetic on the numbers you enter, not a recommendation to buy, keep or surrender any policy — surrendering an existing policy has its own costs and consequences.
Why the headline number misleads
"Your money doubles" describes a multiple, not a rate. Paying ₹50,000 a year for 20 years puts in ₹10 lakh; a ₹20 lakh maturity is double the money but only about 6.2% a year once the twenty years of contributions are accounted for.
What the market actually pays
- Traditional endowment plans: roughly 5.0%–6.5% IRR.
- PPF: 7.1%, tax-free and government-backed.
- A policy returning under 7.1% is beaten by PPF at no risk.
The bundle is the problem
An endowment or ULIP sells cover and investment together, and typically prices both worse than buying them apart. Term cover of ₹1 crore for a 30-year-old non-smoker runs about ₹9,500 a year — so the same premium can buy identical protection and leave most of the money free to invest elsewhere.
Tax, since 2021 and 2023
- ULIPs issued from 1 Feb 2021: tax-free under 10(10D) only if aggregate annual premiums stay within ₹2.5 lakh; above that, gains are taxed at 12.5%.
- Traditional plans issued from 1 Apr 2023: the threshold is ₹5 lakh, above which proceeds are taxed at your slab rate.
Frequently asked questions
What return do endowment and ULIP policies actually give in India?+
Traditional endowment plans typically deliver an IRR of about 5.0% to 6.5% a year, with most landing near 5.2% to 5.8%. ULIP returns depend on the funds chosen and the charges deducted. Both are usually well below what the headline maturity figure suggests, because that figure is not annualised.
Why does a policy that doubles my money return only about 6%?+
Because the doubling happens over a long period. Paying ₹50,000 a year for 20 years puts in ₹10 lakh and a ₹20 lakh maturity looks like double — but spread across 20 years of contributions, that works out to roughly 6.2% a year. The word 'double' describes the multiple, not the rate of return.
How is IRR different from the returns an agent quotes?+
Agents usually quote the maturity amount or the multiple of premiums returned, neither of which accounts for time. IRR is the annual rate that makes your premium payments and the maturity value balance, so it is directly comparable with an FD rate, a PPF rate or a fund's CAGR.
Is a ULIP maturity amount tax-free?+
For ULIPs issued on or after 1 February 2021, the Section 10(10D) exemption applies only if aggregate annual premiums across all your ULIPs stay within ₹2.5 lakh. Above that, gains are taxed as capital gains at 12.5%. For traditional policies issued on or after 1 April 2023, the threshold is ₹5 lakh, and above it the proceeds are taxed at your slab rate.
Why compare against term insurance plus a separate investment?+
Because an endowment or ULIP bundles two things — life cover and investment — and the bundle usually prices both worse than buying them separately. Term cover of ₹1 crore for a 30-year-old non-smoker costs roughly ₹9,500 a year, so the rest of the premium can be invested elsewhere while the cover stays the same.
Should I surrender a policy that shows a poor return?+
Not necessarily, and this tool does not answer that. Surrendering has its own costs: surrender value is often far below premiums paid in the early years, you lose the life cover, and any Section 80C deductions already claimed can be reversed if the policy is surrendered too early. The calculator tells you what the policy returns; whether to keep it is a separate decision, ideally taken with a qualified adviser.
Sources and references
- Section 10(10D) thresholds and capital-gains treatment of ULIPs: Income Tax Department, Government of India
- Insurance product regulation and benefit illustrations: IRDAI
- PPF interest rate of 7.1%, unchanged since April 2020: National Savings Institute
- Endowment IRR of roughly 5.0%–6.5% and term premiums of about ₹9,500 a year for ₹1 crore at age 30 are market figures for 2026; both are editable in the calculator.
Disclaimer: This calculator is for educational purposes only and is not investment, insurance or tax advice. It computes the internal rate of return implied by the figures you enter and excludes riders, loyalty additions, surrender values and tax on maturity. It is not a recommendation to buy, keep or surrender any policy — surrendering an existing policy carries its own costs, including loss of cover and possible reversal of earlier Section 80C deductions. Consult a qualified adviser before acting.
Related: Arbitrage fund vs FD after tax · Saving tax on savings interest