Inputs
Example data table
Sample inputs and a shortened output preview for reference.
| Sample input | Value | Sample output (Year 10) | Value |
|---|---|---|---|
| Annual premium | $2,500 | Cash value | $21,940 |
| Premium years | 15 | After-tax surrender | $19,860 |
| Effective credited rate | 6.00% | Side investment value | $30,960 |
| Surrender start charge | 10% | Break-even year | 16 |
Numbers above are illustrative and depend on your assumptions.
Formula used
1) Net deposit to cash value
NetToValue = Premium − (Premium×Load%) − PolicyFee − AdminFee
2) Effective credited rate
EffRate = clamp(BaseRate×Participation, Floor, Cap)
3) Cash value growth
CashValueᵧ = (CashValueᵧ₋₁ + NetToValueᵧ) × (1 + EffRate)
4) Surrender value and tax
Surrender = CashValue − (CashValue×Charge%)
Tax = max(0, Surrender − TotalPremiums) × TaxRate
AfterTax = Surrender − Tax
5) Side investment comparison
Sideᵧ = (Sideᵧ₋₁ + Premium×(1−Fee%)) × (1 + Return%)
How to use this calculator
- Enter your annual premium, funding years, and projection years.
- Set fees and premium load to match your policy illustration.
- Choose crediting assumptions: base rate, participation, cap, and floor.
- Add surrender charge years and a starting charge percentage.
- Set a tax rate on gains and inflation to view real values.
- Enter a side investment return and fee for comparison.
- Click Calculate and review results above the form.
- Use the CSV and PDF buttons to save your projection.
Premium Efficiency and Early-Year Drag
Premium loads and fixed fees reduce the amount that actually builds value. If you pay $2,500 and lose 6% plus $60, the first-year net deposit falls to $2,290 before growth. Add a $45 admin fee and the first-year drag becomes $255. Small fee changes compound across decades, so enter values from your illustration rather than averages.
Crediting Mechanics with Caps and Floors
The calculator applies participation to the base rate, then clamps the result between a floor and a cap. For example, a 6% base rate at 100% participation credits 6%, but a 10% cap prevents unusually high assumptions. If participation is 70%, that base rate becomes 4.2% before the cap. A 0% floor avoids negative years in simplified models.
Surrender Charges and Timing Decisions
Surrender charges can dominate early outcomes. With a 10% starting charge over 10 years, the model reduces cash value by the charge percentage each year, declining linearly toward zero. On a $30,000 cash value, a 6% charge is a $1,800 haircut. Extending the holding period matters more than increasing the credited rate by a few tenths.
After-Tax Value and Real Purchasing Power
Taxes are applied only to gains: surrender value minus total premiums. If surrender value is $55,000 and total premiums are $50,000, taxable gain is $5,000; at 15%, tax is $750. If after-tax value is $50,000 and inflation averages 3%, the real value after 25 years is roughly $50,000 / 2.09, about $23,900. Use real values to compare long horizons fairly.
Policy Versus Side Investment Comparison
The side investment grows annual contributions net of a fee and compounds at the selected return rate. With a 0.50% fee and 7% return, a $2,500 contribution becomes $2,487.50 before growth. The difference metric compares final after-tax policy value against the side value. Break-even year highlights when after-tax first exceeds premiums paid, and IRR summarizes the overall efficiency.
FAQs
1) What does the effective credited rate represent?
It is the annual growth rate applied to cash value after participation, then limited by the cap and floor. It is not a guaranteed rate and can differ from an insurers actual crediting method.
2) Why can the side investment end higher than the policy value?
A side account may face fewer fixed charges and may use a higher assumed return. Policies provide insurance protection and tax features, but fees, loads, and surrender charges can reduce early compounding.
3) How are taxes estimated in this tool?
Taxes are applied only to gains at surrender: surrender value minus total premiums. The tool does not model policy loans, withdrawals, basis rules, or local regulations, so treat the tax output as a rough estimate.
4) What is the break-even year?
It is the first projection year when after-tax surrender value is at least equal to total premiums paid. It helps you see how long you may need to hold the policy to recover contributions.
5) Can I model a policy loan or partial withdrawal?
Not in this version. Loans and withdrawals can change growth, charges, and tax outcomes. If you want, you can approximate by reducing the final year value or shortening the projection period.
6) How should I choose the inputs?
Start with your insurers illustration: premium, loads, annual charges, surrender schedule, and a conservative credited rate. For the side comparison, use an expected long-term return after fees that matches your risk tolerance.