How to Use the Variable Life Insurance Net Return Calculator
Variable life insurance invests your premiums in sub-accounts (similar to mutual funds), so your cash value rises and falls with investment performance. The catch is that looking only at the sub-account's advertised return can seriously overstate what you actually keep, because insurance-related fees — mortality and expense charges, administrative fees, and fund fees — come out of your premium before it's invested.
This calculator takes your monthly premium, payment term, expected gross sub-account return, and annual fee rate, then computes the cash value both without fees and with fees deducted. The difference between the two is the value lost to fees, and subtracting your total premiums paid from the fee-adjusted cash value gives your actual net return.
Real policies often front-load surrender charges and acquisition costs into the first 7-10 years, so actual early losses can be larger than this simplified model shows. Review the fee schedule in your policy's in-force illustration and confirm you can sustain premiums long-term before committing, since variable life insurance is generally most cost-effective as a decades-long holding.
Frequently Asked Questions
Check the policy's fee disclosure or in-force illustration, which lists mortality and expense (M&E) charges, administrative fees, and fund management fees. These often add up to well over 2% a year, and can be higher in the first several policy years.
If your fund's actual return is lower than your fee rate — or negative — your net return can go negative too. Variable life insurance is not principal-protected, since your cash value is tied to investment performance, so this risk should factor into your decision.