Savings Insurance IRR Calculator
Sales brochures advertise a 'declared rate' of 2.5%, but the actual return you take home is almost always lower once front-end loads, surrender penalties, and cashflow timing are factored in. This tool unpacks the policy into year-by-year cashflows and solves the true annualized IRR.
Why the declared rate overstates your return
- Front-end load: 20–60% of the first-year premium is siphoned to commissions and fees before any money is invested
- Surrender penalty: early surrender returns less than you've paid in
- Cashflow timing: premiums go in early, payouts come out years later — same totals, lower IRR
- Participating rate can move: declared rates are adjusted annually and aren't contractually guaranteed
Wondering if you should surrender and invest in ETFs instead? Head toSavings Insurance vs ETF.
Frequently asked
- What is IRR and how does it differ from the declared rate?
- IRR (Internal Rate of Return) is the discount rate that makes the present value of all cashflows equal zero — i.e., the policy's true annualized return. The declared rate only applies to the portion that enters the policy account; IRR includes every premium paid in and every payout taken out, which is what you actually realize.
- Why does my brochure show 2.5% but IRR comes out to 1.6%?
- Two reasons. First, 20-60% of the first-year premium is taken as commissions and fees before any money is invested. Second, cashflow timing is asymmetric: you pay premiums in years 1-10 but only receive payouts 15-30 years later, which dilutes the annualized return. Together these typically erode 0.5-1.2% off the headline rate.
- How should I compare USD vs TWD policies?
- Compute IRR in the original currency — that's the true return in that currency. To compare across asset classes, do it within the same currency (USD policy vs USD CD or US-listed ETF). If you plan to convert back to TWD later, deduct an FX-conversion-cost estimate; don't directly compare USD IRR against TWD assets.
- How do I handle a participating policy whose declared rate moves?
- The tool supports two modes: (1) plug in actual year-by-year payouts to get a Guaranteed IRR, or (2) input future declared-rate assumptions to simulate a Projected IRR. Use Guaranteed mode for the floor case and Projected mode for the upside, then read the policy as a range rather than a point estimate.
- When is a savings-insurance IRR actually reasonable?
- Short-term (≤6 year) TWD endowment policies that hit ~2% IRR are acceptable. Long-term (20+ year) policies with IRR below 2% typically lose to CDs and broad-market ETFs over the same horizon. Before buying, separate the question of 'do I need protection or savings' — then pick the product.
- How is the surrender penalty factored into IRR?
- The tool ships several common surrender-value curves (linear, front-loaded, fixed percentage) and lets you customize year-by-year values. Surrender IRR treats that year's surrender amount as the final cashflow, giving you the realized return if you exit in year N.