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Do you have maturing old-life insurance policies you bought years and even decades back, usually regarding them as just simple protection plans or low-interest savings schemes? But do you know that these old policies — particularly the ones bought before 2010 — can often yield surprisingly attractive returns if dealt with wisely, with returns going up to as much as 15% every year in some instances.

With interest rates volatile and old-fashioned savings products notching meagre returns, digging up your past insurance policies might prove to be a wise financial decision in 2025.

Why old insurance policies are more valuable today

Older life insurance policies, especially old endowment and money-back policies of Life Insurance Corporation of India (LIC) and other companies, typically had guaranteed returns that were fixed at levels much higher than prevailing market rates. Policies written prior to 2010 typically used a bonus rate of ₹40-₹50 per ₹1,000 of the sum assured per year.

These policies also had:

· •Increased bonus rates: In contrast to the current low-participation bonus schemes, previous policies had higher reversionary and loyalty bonuses.

· •Protection of capital: The maturity benefits, as well as bonuses, were assured.

· •Tax efficiency: Payments still benefit from Section 10(10D) exemptions, which make them tax-free if requirements are fulfilled.

Consequently, certain long-standing policies, particularly those approaching maturity at the moment, are providing efficient compounded returns of 8%-10% — and even higher on occasion after taking loyalty additions into account in the last few years.

As per industry experts cited in a recent Economic Times report, some matured policies are giving internal rates of return (IRRs) ranging up to 12%-15%, much better than existing fixed deposits, debt mutual funds, and small savings schemes such as PPF and NSC.

How to tap the maximum value from your old policy

If you have an old insurance policy, here are some things you can do:

1. Hold on until maturity

If your policy is due to mature in a few years, it usually is best to remain invested. The last bonuses announced near maturity (e.g., loyalty bonuses or terminal bonuses) significantly enhance returns, bringing total gains close to the 12%-15% level.

An early surrender would forfeit these bonuses and result in lower guaranteed surrender values, which detract from effective return.

2. Consider a policy loan

If you require liquidity but do not wish to sacrifice future profits, you can opt for borrowing against your policy. Policy loans are often offered at lower interest rates than personal loans (about 9%-10%) and permit the policy to keep earning bonuses.

Through a loan, you can enjoy the high return guaranteed at maturity while satisfying short-term cash needs.

3. Sell your policy

Rising in occasional cases is also an emerging secondary market for life insurance policies, especially overseas (referred to as life settlement markets). Although a rarity in India as of now, certain high-premium policies with a large bonus attached can be found appealing by institutional buyers in search of regular returns.

Policyholders can be facilitated through specialist financial planners, but this is still an emerging phenomenon and needs to be scrutinized for tax and legal considerations.

Main factors to consider before acting

• Verify bonus history: Obtain the year-on-year bonus history from your insurer on your policy. Understand the reversionary and loyalty bonuses.

• Screen the surrender value: Verify you have an idea of the guaranteed and special surrender value if you're considering early settlement.

• Moderate tax impact: The majority of older policies are tax-free maturity proceeds but will forfeit this should they be surrendered earlier.

• Seek professional advice: If the policy value is large (₹10 lakh or more), consider consulting a financial advisor to optimize your decision.

Why reviewing old policies is smart today

With real returns on fixed income assets languid and inflation stuck high, each percentage point of additional return is important. Mature insurance policies — formerly regarded as soporific and inert — are becoming secret assets for discerning investors who want stable, tax-free, and guaranteed returns.

Rather than allow these valuable policies to lapse or cash them in prematurely, a strategic assessment today will profoundly enhance your bottom line tomorrow.

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