📖 The story
Mr. Kane pays $150 monthly into an endowment life insurance policy for 15 years; the company projects a maturity benefit of $34,000. He wants to know the actual return.
ℹ Ordinary premiums, projected maturity benefit.
Topics › Insurance & Product Comparison › What return does the life insurance really deliver?
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Insurance & Product Comparison
What return does the life insurance really deliver?
Change any number and press "Calculate" – or use "Type in" on the right to watch it entered.
What you learn
The bare maturity sum says little – only the recomputed return makes a policy comparable with other investments. It is not the promise that counts, but the number.
In short: Only looking at the return makes an insurance policy comparable with other investments – the bare maturity sum says little.
Formula
Iterative: i_eff such that K0·q^n + R·(q^n−1)/(q−1) = FV
With the example numbers
Iterativ: Effektivzins, bei dem der Sparplan den Zielwert 34.000,00 € erreicht = 3,02 %
How to read the formula
With a savings plan the rate cannot be solved directly because it appears in several places of the formula. The calculator tries it iteratively until the deposits and target value match exactly (internal rate of return). This is how, for example, the true return of an insurance policy becomes visible.
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