Insurance Policy Return (IRR) Calculator
What your policy earns a year, and whether term cover plus investing would beat it.
Term insurance + investing
What a given return would need
The maturity amount at which your premiums and payouts would earn each yearly return. Insurers’ benefit illustrations use assumed gross returns of 4% and 8% — before charges and the cost of cover.
Year by year
How this was calculated
Results are estimates for general information and planning, not financial advice. Banks and institutions may calculate differently (rounding, fees, rate changes). Confirm figures with your lender or a qualified adviser before deciding.
About the Insurance Policy Return (IRR) Calculator
Endowment, money-back, guaranteed-income and unit-linked policies mix two things: life cover and savings. The brochure shows what you pay and what you get back — but not the yearly return on your premiums, because the money goes in over many years and comes back at different times. This calculator finds that rate, the internal rate of return (IRR): the single yearly rate at which your premiums, compounded until each payout, add up exactly to what the policy pays.
It then compares the policy with the usual alternative — buy term insurance for the cover and invest the rest — with the same money leaving your pocket on the same dates, and works out the break-even return at which the two come out equal. Enter the amounts from your policy document or benefit illustration; nothing leaves your browser.
How to use it
- Enter the premium you pay each time (with GST), how often you pay it, the premium-paying term and the policy term, in years.
- Enter the maturity amount — what the policy pays at the end, bonuses included — and any payouts before that: money-back instalments or a yearly guaranteed income, each with the policy year it is paid at the end of. Add a yearly payout fills in a regular income for a range of years.
- For the comparison, enter a term insurance premium for similar cover over the policy term (get a quote for your age) and the return you expect on the money invested instead.
- Read the IRR, the totals and the comparison. The year-by-year table shows both plans; copy the summary or download it as CSV.
Examples
₹50,000 a year for 15 years · 20-year term · ₹14,50,000 at maturity · term cover ₹12,000 a year · invest at 8%
IRR 5.02% a year · term + investing ends with ₹15,61,275, ₹1,11,275 more · break-even return 7.47%
₹30,000 a year for 20 years · ₹75,000 at the end of years 5, 10 and 15 · ₹6,50,000 at year 20 · term cover ₹6,000 a year
IRR 4.78% a year · break-even return 7.70%
In the years a payout falls due, it is set against the next premium: the net cash flow at year 5 is +₹45,000.
₹1,00,000 a year for 10 years · ₹1,20,000 a year in years 11 to 25 · ₹10,00,000 back at year 25 · term cover ₹15,000 a year · invest at 7%
IRR 6.89% a year · investing at 7% would leave only ₹48,212 at the end — the policy wins unless your investments earn more than 8.81%
How the return is worked out
The IRR is the rate r that makes the present value of every cash flow zero:
0 = Σ CFₜ × (1 + r)^(−t)
- Premiums are negative cash flows at the start of each instalment: t = 0, 1, 2 … for yearly premiums, t = 0, 1/12, 2/12 … for monthly ones.
- A payout for policy year y is a positive cash flow at its end, t = y; the maturity amount comes at the end of the term.
- t is in years from the first premium, so r is a yearly rate (compounded once a year), like Excel’s
XIRRwith dates a whole number of months apart.
There is no formula for r; the calculator scans rates from −99% to 1,000% a year for every rate that balances the cash flows and refines each one by bisection. Payouts during the premium-paying years can, in rare cases, give more than one such rate — the calculator then says so.
Buy term and invest the rest
The comparison keeps your pocket the same: at every instalment you pay what the policy would cost. Out of it you pay the term premium (spread over the same instalments, and paid for the whole policy term), and the rest is invested at your chosen return. Each time the policy would pay you a money-back instalment or an income, the same amount is taken out of the investments. At the end of the term, what is left is compared with the maturity amount. If the investments ever run short, the shortfall is treated as borrowed at the same rate, and the calculator says in which year.
The break-even return is the investment return at which both end with the same amount. In effect it is the return the policy’s savings part earns once the cover is paid for separately.
Reading a benefit illustration
Insurers must give you a benefit illustration before you buy. For products whose benefits are not all fixed at the start, IRDAI’s Master Circular on Life Insurance Products has them show the guaranteed and non-guaranteed benefits at gross investment returns of 4% and 8% a year (clause 33.1). Those are assumed returns on the insurer’s investments, before charges and the cost of your cover — not your return. Enter the maturity shown at 4% and then at 8% to see the range of your real IRR. The maturity needed table shows what the policy would have to pay for your premiums to earn 4%, 6% or 8% a year.
What the comparison leaves out
- The death benefit. The policy and the term plan may pay different amounts if you die during the term; compare the cover too.
- Tax. Deductions for premiums or a tax-free maturity raise your effective return, and tax on the investment returns lowers the alternative’s.
- Risk. Guaranteed policy benefits do not depend on markets; investment returns are not guaranteed. Use a return that fits what you would really invest in.
- Surrender. Leaving a policy early usually pays much less than the premiums paid in the first years.
Limitations
- You enter the amounts: the calculator does not know any insurer’s plans, bonus rates or premiums.
- Payouts are at the end of a policy year, premiums at the start of each instalment. A policy that pays at other times gives a slightly different IRR.
- Riders, premium waivers, loans against the policy and partial withdrawals are not modelled unless you enter them as payouts.
- The term premium is a level yearly amount for the whole policy term, spread over the same instalments as the policy’s premium.
Privacy
Everything is calculated in your browser. Your premiums and policy amounts are never uploaded or stored on a server.
Frequently asked questions
How do I find the real return of my LIC or other insurance policy?
Enter the premium, how often and for how many years you pay it, the policy term, the payouts and the maturity amount from your policy document or benefit illustration. The IRR is the yearly return on your premiums — for example 5.02% for ₹50,000 a year for 15 years that becomes ₹14.5 lakh at year 20.
Why is the IRR lower than the bonus rate or the 8% in my illustration?
A bonus rate is declared per ₹1,000 of sum assured, not as a return on your premiums. The 8% in an illustration is an assumed gross return on the insurer’s investments, before charges and the cost of your life cover. The IRR is what your own premiums actually earn.
What does the break-even return mean?
It is the yearly return your investments would need for “buy term and invest the rest” to end with exactly the policy’s maturity amount. If you expect to earn more than that, term plus investing comes out ahead; if less, the policy does.
Does this work for ULIPs?
Yes. Enter the premium and terms, and the fund value at maturity from the illustration (at 4% and at 8%) as the maturity amount. Partial withdrawals can be entered as payouts.
Should I surrender my policy?
This calculator does not advise. To compare, work out the IRR of the premiums you have paid with the surrender value as the maturity amount at the current policy year, and compare the policy’s remaining premiums and benefits with the alternatives. Ask the insurer for the surrender value first.
Is tax included?
No. Premium deductions and tax-free maturity, where they apply to you, raise the policy’s effective return; tax on investment gains lowers the alternative’s. Adjust the amounts if you want to include them.