I have been servicing a limited pay whole life policy for 15 years. How do I compute the internal rate of return of the policy to help me with my next policy selection? - Seedly
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Anonymous

Asked on 21 Jul 2020

I have been servicing a limited pay whole life policy for 15 years. How do I compute the internal rate of return of the policy to help me with my next policy selection?

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Hi there,

If you are looking to calculate the IRR, you can actually look at the bottom of the page of the policy illustrations, with the surrender value. It is required by all insurers to list the IRR of the policy over there.

Do take note that the IRR stated, is with relation to the end of your policy term. If you are looking for a specific point which you will surrender the policy, you can use a financial calculator, and calculate the total amount paid, corresponding with the value at surrender.

In my opinion, the IRR is more useful for an endowment policy as there will be a point which the policy will mature. In most cases with a limited pay life policy, you will not realise the value of the policy as it is paid up, and it gives better returns on death.

I do hope i was able to address your queries!

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Susan

21 Jul 2020

This is helpful. I was considering if there is a suitable point i can surrender the policy so that i can consider other options eg term or endowment. Do you know where i can check how much i can get if i surrender for eg, my Pru policy now?
Duane Cheng
Duane Cheng

21 Jul 2020

Hi Susan, For life policies, the suitable point you might be referring to might be the breakeven point, which will be illustrated in your document. I would not recommend surrendering your policies for a term or endowment, because at that point in time if there are any changes to your health, you will not be able to buy in at a standard level. The cost of insurance would also be significantly higher at your breakeven point, making it counter intuitive. If you are currently a Prudential client, you can log in to our PRUAccess to check on your policy values, and generate a revised benefit illustration. I am aware that you are able to do so with the other insurers via their online portal.
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