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Universal Life Insurance Calculator

Estimate universal and indexed universal life (IUL) premiums, cost of insurance drag, and projected cash accumulation under different crediting rates.

Short answer

Universal Life Insurance Calculator

$294,317Projected cash value (year 25)

Cost of insurance inside the policy runs about $546/yr at your age and rises every year. Of the $150,000 you pay in, roughly $0 is consumed by insurance costs and fees. Underfunding a UL is the classic lapse trap — if cash value hits zero, the policy dies.

How it's calculated: $6,000/yr into a $500,000 UL policy for 25 years at 5.5% crediting. Adjust the inputs below to recalculate for your own numbers.

Disclaimer: Estimates only — not insurance, financial, or legal advice. Actual premiums depend on underwriting, state, carrier, claims history, and credit-based insurance score where permitted. Get quotes from licensed agents before buying coverage.

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Death benefit ($)$500,000

Age at issue40

Planned annual premium ($)$6,000

Flexible — but underfunding risks lapse.

Assumed crediting rate (%)5.5%

IUL caps typically 8–11% with a 0% floor.

Projection years25

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Related calculators

Whole Life Calculator Term Life Calculator Key Person Insurance

Formula used

UL accumulation = (premium − COI) compounded

Universal life unbundles the policy: your premium pays the annual cost of insurance (which rises with age), and the remainder accumulates at a crediting rate — fixed for traditional UL, index-linked with a cap and 0% floor for IUL. The flexibility is real, but so is the risk: low premiums plus low crediting rates can hollow out the cash value and lapse the policy.

CV(t+1) = (CV(t) + premium − cost of insurance) × (1 + crediting rate)

Typical IUL cap

8–11%

Floor on down years

Policies lapsed by yr 20

~40%

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The IUL pitch vs the IUL math

IUL credits interest based on an index (usually the S&P 500) with a cap around 8–11% and a 0% floor. Long-run illustrated averages of 5.5–6.5% are reasonable; anything above 7% in a projection is marketing. Sequence matters less than caps — in years the index returns 20%, you still get the cap.

• Always run the projection at 1–2% below the illustrated rate.
• Ask for the guaranteed column: that's the policy at minimum crediting and maximum charges.
• Overfunding early minimizes the COI drag as a share of cash value.

Lapse risk is the hidden story

Industry data shows a large share of UL policies never reach maturity — they lapse when rising internal costs overtake a stagnating cash value. If you own one, request an in-force illustration every 2–3 years and compare the projected duration against your age.

FAQ

Is IUL a good investment?

It's life insurance with an accumulation feature, not an investment account. Caps limit upside (8–11%), fees run 1–3% of premiums, and the cost of insurance rises with age. After maxing a 401(k) and IRA, it can make sense for high earners wanting tax-deferred growth with a 0% floor — run projections at conservative rates.

What's the difference between UL and whole life?

Whole life has fixed premiums, guaranteed cash values, and dividends. UL has flexible premiums and a cash account that earns a declared or index-linked rate — more flexible, but the guarantees are thinner and lapse risk is real if underfunded.

Can a universal life policy lapse?

Yes. If cash value can't cover the monthly cost of insurance, the policy terminates — often with a taxable gain. This typically happens to underfunded policies bought in the high-interest era or IULs that underperformed their illustrations.

How this calculator is built

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Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.

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