What's the real return on your insurance policy?
Most cash-value policies pitch a 'guaranteed return' that hides the real IRR after years of fees. We extract the actual rate from your policy's premium and payout schedule.
How the IRR is computed
IRR is the discount rate that makes the net present value of a cash flow series equal zero:
Σ CFt ÷ (1+IRR)t = 0.
We treat premiums paid as negative cash flows and the maturity value (or surrender value, or death benefit) as a positive cash flow at the appropriate year. The calculator uses Newton-Raphson iteration to solve for IRR.
Why this matters: the policy brochure tells you "pay $3K/year for 20 years, get $80K back." That sounds like a 33% gain. The real return is 1.5-2.5% per year because most of the early premiums had only a few years to compound, and the late premiums had almost none.
Three benchmarks to compare against: bond yields (currently 4-5% nominal), high-yield savings (4-5%), and S&P 500 long-run return (10% nominal / 7% real). Most cash-value insurance policies underperform all three.
Math runs locally. Inputs never leave your browser. Source on github.
Real-world scenarios
- "Pay $60K, get $100K" is a 2.6% IRR — the brochure math vs the actual math — why headline gain rates and IRRs disagree, and what gets stripped between them.
- Whole life vs "buy term, invest the rest": $383K vs $95K at year 20 — the spread between bundling and unbundling protection from investment.