Q & ACategory: InsuranceHow to compute return on endowment policy ?
Dana asked 4 years ago

Hi KC,
Currently, I have been presented with a endowment policy by an agent which sounds something like this :-
Premium : 12,000 per year for 6 years = 72,000
In year 15 you withdraw, you will get back = 80,919
In year 20 you withdraw, you will get back = 111,846
In year 30 when it lapse, you will get back = 206,974
How do we calculate the return for this type of investment ?

2 Answers
KCLau Staff answered 4 years ago

You can use the IRR formula in the Google Spreadsheet or Excel.

Use these data:
Year Cash Flow
1: -12k
2 : -12k
3 : -12k
4 : -12k
5 : -12k
6 : -12k
7-14: 0
15 : 80,919

Similar for the other two scenario:
20 : 111,846
30 : 206,974

Let me know what result did you manage to calculate?

Dana answered 4 years ago

Hi KC,
Thank you so much for your guidance !
Like Scenario 1, Year 15 is the answer  3.35% ?
Scenario 2,  Year 20 is the answer 2.70% ?
Scenario 3, Year 30 is the answer 4.06% ?

Dana replied 4 years ago

Correction for Year 15, is the answer 1.02% ?

KCLau Staff replied 4 years ago

Good.. now you know how to do it.