Life insurance cash value calculator to project cash and surrender value or the annual premium needed using allocation, charges, withdrawals, rate, and term.
Life Insurance Cash Value Formula
The calculator uses an annual recurrence. It adds the portion of premium allocated to cash value, subtracts charges and withdrawals, and then applies the selected crediting rate:
CV_t = max(0, CV_(t-1) + Premium * Allocation - Charges - Withdrawals) * (1 + r)
The projected surrender value applies the selected surrender charge to the ending cash value:
Surrender Value = Ending Cash Value * (1 - Surrender Charge Rate)
Variables:
- CV_t is cash value at the end of year t
- Premium is the annual policy premium
- Allocation is the modeled percentage of premium that increases cash value
- Charges are annual policy and insurance costs deducted from value
- Withdrawals include modeled annual loans or withdrawals
- r is the annual crediting rate
For required-premium mode, the calculator solves the same recurrence repeatedly until it finds a level annual premium that reaches the target value.
Cash Value Growth Reference
The table assumes a $6,000 annual premium, 70% allocation to cash value, $600 annual charges, no withdrawals, and a zero starting value.
| Annual crediting rate | 10-year cash value | 20-year cash value | 30-year cash value |
|---|---|---|---|
| 2% | $40,207 | $89,220 | $148,966 |
| 4% | $44,951 | $111,489 | $209,982 |
| 6% | $50,298 | $140,374 | $301,686 |
| 8% | $56,324 | $177,923 | $440,445 |
Example Problems
Example 1: Project cash value.
A policy receives $6,000 annually for 20 years. Seventy percent is modeled as cash-value allocation, annual charges are $600, and the crediting rate is 4%.
The simplified recurrence produces a projected cash value of about $111,489 before any surrender charge.
Example 2: Find the surrender value.
If the projected cash value is $111,489 and a 5% surrender charge applies at the end of the projection, the estimated surrender value is $105,915.
Policy loans and market-value adjustments can reduce the amount further.
Frequently Asked Questions
Is all of a life insurance premium added to cash value?
No. Premiums can fund mortality costs, expenses, riders, commissions, and other charges. The allocation field is a planning assumption, not a substitute for the policy illustration.
What crediting rate should I use?
Compare the guaranteed rate or values with a reasonable nonguaranteed scenario. Indexed and variable policies require additional assumptions about caps, participation rates, investment returns, and fees.
Does a policy loan reduce cash value or death benefit?
Loans can accrue interest and reduce available cash value and the net death benefit. Policy treatment varies, so model recurring withdrawals conservatively and review an in-force illustration.
