Financial Calculators
Insurance Policy IRR Calculator
A maturity value in lakhs can hide a return in low single digits. IRR is the honest yardstick; compute it before you buy or surrender.
Actual annual return (IRR)
4.76%
- Total premiums paid
- ₹15,00,000
- Maturity received
- ₹28,00,000
IRR is the honest yardstick for any premium-and-payout product: it accounts for when each rupee moves. Compare the result with what the same premiums would earn elsewhere before buying or surrendering; insurance cover has value too, so weigh both.
Why IRR, not the maturity brochure
Traditional endowment and money-back policies quote impressive maturity values but collect premiums for years before paying anything. The only fair measure of such a pattern is IRR, the discount rate at which your outflows and the payout balance, and for many traditional plans it lands between 4% and 6%.
That number is not an accusation; it is information. Insurance protection has genuine value. The question IRR answers is whether the investment component earns its keep, or whether pure term cover plus proper investing would serve the family better.
Solving the IRR
0 = -sum of premiums discounted at r + maturity discounted at r\nSolved numerically (bisection) for r.Worked example: paying Rs 1,00,000 a year for 15 years and receiving Rs 28,00,000 at the end of year 20 works out to an IRR of just 4.76% a year, despite the maturity value being nearly double the premiums paid.
Frequently asked questions
The maturity is almost double my premiums. How is the return under 5%?
Time. The first premium waits 20 years, and even doubling over such periods is a modest annual rate. IRR accounts for when each rupee moves, which simple ratios hide.
Should I surrender a poor-IRR policy?
Not reflexively. Compare surrender value redeployed at realistic returns against continuing, count the life cover you would lose, and mind exit charges. Recently issued policies deserve extra caution; take advice on your specific case.
Does this calculator handle money-back plans?
It models a single maturity payout. Money-back plans with interim payouts have slightly different IRRs; the single-payout result remains a good first approximation.
What is the alternative it should be compared with?
Pure term insurance for protection plus the same premium difference invested in mutual funds. Run the comparison honestly, including the discipline both routes require.
Protection and growth are different jobs.
We help families separate the two, term cover for protection, proper investing for growth.