Indexed Universal Life Insurance – Cash Value Growth Estimate
Estimate potential cash value growth based on policy contributions and market index performance.
Estimated Cash Value Growth
Understanding Indexed Universal Life (IUL) Insurance and This Calculator
Indexed Universal Life (IUL) insurance is a type of permanent life insurance that offers a death benefit along with a cash value component. This cash value grows based on the performance of a chosen market index (like the S&P 500), but with downside protection (a floor) and upside potential limited by a cap or participation rate. This calculator helps you estimate the potential cash value accumulation and the resulting death benefit over time.
How Indexed Universal Life Insurance Works:
Premiums: A portion of your premium goes towards the cost of insurance (COI) and policy expenses, while the remainder is credited to your cash value.
Cash Value Growth: The cash value is linked to the performance of a selected market index. If the index performs well, your cash value grows. If the index performs poorly, your cash value is typically protected from losses by a floor (often 0%), meaning it won't decrease due to market downturns.
Caps and Participation Rates: Growth is usually capped. A cap rate sets the maximum interest rate your cash value can earn. A participation rate determines the percentage of the index's gain that is credited to your cash value (e.g., 100% participation means you get the full index gain, up to the cap).
Policy Fees: Like all universal life policies, IUL policies have internal charges, such as the Cost of Insurance (COI) and administrative fees, which are deducted from the cash value.
Calculator Inputs Explained:
Annual Premium Contribution ($): The total amount you plan to pay into the policy each year.
Number of Policy Years: The timeframe over which you want to estimate the cash value growth.
Annual Policy Fee (%): Represents the combined annual costs (COI, administrative fees, etc.) deducted from the cash value. Expressed as a percentage of the cash value or a fixed charge. For simplicity, this calculator uses a simplified percentage deduction.
Annual Index Cap (%): The maximum annual rate of return credited to the cash value, regardless of how high the index performs.
Index Participation Rate (%): The percentage of the market index's gain that is applied to your cash value, up to the cap.
Annual Index Floor (%): The minimum annual rate of return credited to the cash value, protecting it from market losses.
Current Market Index Performance (%): The assumed annual growth rate of the underlying market index for the specific year being calculated. In a real IUL policy, this fluctuates year to year.
How the Calculator Works (Simplified Logic):
The calculator simulates year-by-year growth. In each year:
Calculate Index-Based Interest: Determine the potential interest earned based on the market index performance, participation rate, and cap rate.
Apply Floor: Ensure the calculated interest is not less than the specified floor rate.
Deduct Fees: Subtract the annual policy fees (as a percentage) from the cash value.
Add Premium: Add the annual premium contribution to the cash value.
Update Cash Value: The cash value for the next year is the result of these calculations.
The estimated death benefit typically increases with the cash value, though the exact calculation depends on the specific policy's death benefit option (Option A or Option B). This calculator provides a simplified estimate assuming the death benefit grows with the cash value accumulation.
Disclaimer: This calculator provides an *estimate* only and does not reflect the actual performance of any specific insurance product. Actual results may vary significantly due to market fluctuations, changes in policy fees, and the specific crediting methodologies of the insurance company. Consult with a qualified financial advisor and the insurance policy's illustrations for precise figures.
function calculateCashValueGrowth() {
var annualPremium = parseFloat(document.getElementById("annualPremium").value);
var policyYears = parseInt(document.getElementById("policyYears").value);
var annualFeeRate = parseFloat(document.getElementById("annualFeeRate").value) / 100;
var capRate = parseFloat(document.getElementById("capRate").value) / 100;
var participationRate = parseFloat(document.getElementById("participationRate").value) / 100;
var floorRate = parseFloat(document.getElementById("floorRate").value) / 100;
var currentMarketIndex = parseFloat(document.getElementById("currentMarketIndex").value) / 100;
var resultContainer = document.getElementById("result-container");
var estimatedCashValueDisplay = document.getElementById("estimatedCashValue");
var estimatedDeathBenefitDisplay = document.getElementById("estimatedDeathBenefit");
var estimatedNetGrowthRateDisplay = document.getElementById("estimatedNetGrowthRate");
// — Input Validation —
if (isNaN(annualPremium) || annualPremium < 0 ||
isNaN(policyYears) || policyYears < 1 ||
isNaN(annualFeeRate) || annualFeeRate < 0 ||
isNaN(capRate) || capRate < 0 ||
isNaN(participationRate) || participationRate 1 ||
isNaN(floorRate) || floorRate < 0 ||
isNaN(currentMarketIndex) || currentMarketIndex < -1 || // Allow negative market performance
annualPremium <= 0 || policyYears <= 0 ) {
alert("Please enter valid positive numbers for all fields.");
resultContainer.style.display = 'none';
return;
}
// Ensure cap is not less than floor for logical consistency if both are positive
if (capRate = 0 && floorRate >= 0) {
alert("The Index Cap Rate cannot be lower than the Index Floor Rate.");
resultContainer.style.display = 'none';
return;
}
var currentCashValue = 0;
var totalPremiumsPaid = 0;
var totalInterestCredited = 0;
var totalFeesDeducted = 0;
var year = 0;
var cumulativeNetGrowthRate = 0;
// Simplified simulation loop
for (year = 1; year totalAvailableForFees) {
feesDeductedThisYear = totalAvailableForFees; // Cap fees to available funds
}
currentCashValue = currentCashValue + interestEarnedThisYear – feesDeductedThisYear;
currentCashValue = currentCashValue + annualPremium; // Add premium after fees/interest
// Ensure cash value doesn't go below zero due to fees/COI if premium is insufficient
if (currentCashValue 0) {
// Net gain is total interest credited minus total fees deducted
var netGain = totalInterestCredited – totalFeesDeducted;
cumulativeNetGrowthRate = (netGain / totalPremiumsPaid) * 100;
}
var finalCashValue = currentCashValue;
// Simplified death benefit calculation: base death benefit (e.g., initial premium) + cash value
// In reality, it's more complex (Option A vs Option B, insurer rules)
// For this example, let's assume a base death benefit roughly equal to total premiums paid for simplicity.
var estimatedInitialDeathBenefit = totalPremiumsPaid > 0 ? totalPremiumsPaid : annualPremium; // A rough baseline
var estimatedDeathBenefitValue = estimatedInitialDeathBenefit + finalCashValue;
estimatedCashValueDisplay.textContent = "Final Estimated Cash Value: $" + finalCashValue.toFixed(2);
estimatedDeathBenefitDisplay.textContent = "Estimated Death Benefit: $" + estimatedDeathBenefitValue.toFixed(2);
estimatedNetGrowthRateDisplay.textContent = "Average Annual Net Growth Rate (after fees): " + cumulativeNetGrowthRate.toFixed(2) + "%";
resultContainer.style.display = 'block';
}