Life Insurance Corporation of India (LIC) is far more than just an insurance provider. It is also one of the country’s biggest long-term investors, managing a massive pool of household savings. While LIC’s listed stock has seen muted performance since its IPO, millions of Indians continue to buy LIC policies for safety, predictability and long-term income protection.

As of January 14, LIC’s share price closed around Rs 825, well below its post-listing highs. However, market performance of LIC’s stock and returns earned by policyholders are two very different things.

LIC’s financial health

LIC’s quarterly earnings fluctuate, as is typical in the life insurance business. In the July–September quarter of FY26, the insurer reported a net profit of over Rs 10,000 crore, up 32% year-on-year, while premium income rose modestly. Its solvency ratio of 2.13 reflects a strong financial cushion to meet future claims and obligations.

Where LIC invests your premium

LIC follows strict investment rules laid down by the regulator. A large portion of policyholder money is invested conservatively:

• At least 50% goes into government securities and other approved safe assets

• Around 15–20% is invested in equities of established Indian companies

• The remaining funds are spread across state government bonds, corporate debt and infrastructure projects

This makes LIC the largest institutional investor in Indian equities, while still keeping safety as the top priority.

How safe is your money

More than 75% of LIC’s investments are backed by sovereign or government guarantees. This conservative allocation is designed to protect capital and ensure LIC can comfortably pay claims, bonuses, pensions and maturity amounts over decades.

How policyholders earn returns

LIC policies do not generate returns like mutual funds or stocks. Instead, earnings come through structured benefits:

• Sum assured paid on maturity or death

• Annual bonuses added during the policy term

• Final or loyalty bonuses in some plans

• Annuity income in pension policies

These payouts are predictable but generally modest.

Why LIC returns feel lower

LIC policies include costs such as mortality charges, administration expenses and agent commissions. These reduce net returns compared to direct market investments. While tax benefits improve effective returns, LIC policies are not designed for aggressive wealth creation.

How bonuses are decided

Bonuses depend on LIC’s annual surplus. After meeting all claims and expenses, the surplus is split — 95% goes to policyholders and 5% to the government. Better investment performance typically leads to higher bonuses.

What buyers should expect

LIC policies work best when viewed as income protection tools, not growth instruments. Their core purpose is to provide financial security to families in case of death, retirement income through pensions, and long-term stability — not to beat the stock market.

Bottom line: Buying an LIC policy means choosing safety, certainty and protection over high returns. For wealth creation, other instruments may work better — but for peace of mind, LIC continues to remain a trusted choice for millions of Indian households.