Does anyone know of an ROI calculator that is simple to use when evaluating life insurance proposals? I've done this longhand which is a pain and I've found a few online calculators that come close but still aren't great. Basically, a calculator/spreadsheet where you can plug in the death benefit, premium, and then it would show the ROI each year. Some insurance proposal software can include this in the output but not all. Thank you in advance.
ROI calculator for life insurance
- Thread starter mrteecup
- Start date
If the quoting software doesn't output that report, then you can just use a TVM calc.
I use this one.
Set present value at zero, payment at annual premium, and future at the death benefit (make sure to make of the values negative). Period to life expectancy and mode to "end".
Hit "rate" and there is your IRR on death benefit.
You can also easily do this in Excel using the "XIRR" function. I do that for short or variable (1035) pays. I can't upload Excel docs but I can email you the one I use if you want.
Hope that helps.
- 11,505
Are you looking for ROI on cash values compared to premiums paid?
Or ROI on the death benefit?
Or ROI on the death benefit?
- 11,505
If you're looking for ROI on the cash values, let me help you:
It sucks.
Of course, it sucks... compared to what? What metrics?
Compared to any other investment with a reasonable rate of return expectation on a dollar-for-dollar basis.
But if you're looking for the capital equivalent value of a tax-exempt stream of income... nothing will beat whole life insurance. I created my own spreadsheet on that calculation (which I consider proprietary and I won't share)... but I can ensure that one can spend against their life insurance as though they had earned 11.5% to 27.58% each year for 10 years.
Amazon product ASIN 1495830713
It sucks.
Of course, it sucks... compared to what? What metrics?
Compared to any other investment with a reasonable rate of return expectation on a dollar-for-dollar basis.
But if you're looking for the capital equivalent value of a tax-exempt stream of income... nothing will beat whole life insurance. I created my own spreadsheet on that calculation (which I consider proprietary and I won't share)... but I can ensure that one can spend against their life insurance as though they had earned 11.5% to 27.58% each year for 10 years.
Amazon product ASIN 1495830713
- 477
Tax equivalent income stream of 11.5% to 27.58% from whole life insurance???
You better not show ANYBODY that spreadsheet.
- 11,505
The calculations come from a cpa. I've used it many times.
Read the book and you might like it too.
Read the book and you might like it too.
- 11,505
We have five CPAs in our group. If there was a problem... we'd know about it.
- 4,997
not a lot of great tools or easy to use tools on this. And even those carriers that do have it, most carriers show the entire premium as the "investment" into the calculation. That isnt the entire picture as the cost of term life for the time period is not going into the policy at all to attempt to provide a return. The 1st key to anyone buying any life insurance is that they have a need or want for the death benefit component. the cost of that component should be deducted from the total "investment" into the calculator before looking at any IRR on the Cash Value
Most CV IRR are negative for many years & then later start to get into a 3-4% range once they have made up for all the early years of it making nothing
I personally dont like IRR as I think it gives the wrong impression about life insurance & what it is & isnt compared to other investments.
I have no problem with it being shown as a tool for numerous strategies & a safe slice of the clients overall portfolio. For whatever reason, I just dont prefer an IRR that gives the impression it will perform exactly that way.
Most CV IRR are negative for many years & then later start to get into a 3-4% range once they have made up for all the early years of it making nothing
I personally dont like IRR as I think it gives the wrong impression about life insurance & what it is & isnt compared to other investments.
I have no problem with it being shown as a tool for numerous strategies & a safe slice of the clients overall portfolio. For whatever reason, I just dont prefer an IRR that gives the impression it will perform exactly that way.
- 10,779
Pay attention to Davids wording. He is looking at the payout rate in addition to the accumulation rate.
Im not saying his numbers are right, or wrong.
But nothing with a "conservative - moderately conservative" risk tolerance offers a higher payout rate for income than a UL policy using GPT... second to that is a WL or UL using CVAT.
He also could be including the DB in that calculation. (yes, there is still a decent DB left if income is set up properly)
Im not saying his numbers are right, or wrong.
But nothing with a "conservative - moderately conservative" risk tolerance offers a higher payout rate for income than a UL policy using GPT... second to that is a WL or UL using CVAT.
He also could be including the DB in that calculation. (yes, there is still a decent DB left if income is set up properly)
- 11,505
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