How to the Calculate Present Value of a Whole Life Insurance Policy
The present value of your whole life insurance policy can be calculated relatively quickly--without the need for complex mathematics or the use of specialized formulas. If you want to know how much your policy is worth today, you need to know the cash surrender value. This is the amount of money that you would receive if you decided to cancel your whole life policy immediately.
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Instructions
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Examine your most recent whole life insurance policy statement. Locate the amount of your cash value account and make a note of this figure. This number is the actual amount of cash that has accumulated inside your whole life policy since the date you purchased it.
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Subtract from the cash value the amount of any outstanding policy loans. Money borrowed from whole life insurance cash values is expected to be repaid. In the event that you cancel your policy, this money will be deducted from your cash value.
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Subtract from the cash value the amount of any surrender charges. Insurance carriers will impose certain fees or penalties in the event that you terminate a whole life insurance policy prior to a certain date. This is intended to help the insurance company recoup some of the potentially significant expenses that it undertook to initially insure you.
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Tips & Warnings
Many life insurance companies will clearly list the cash surrender value on your monthly policy statement, which should be a figure that already considers your outstanding debts and surrender charges.
Terminating a whole life insurance policy with a positive cash surrender value may result in income taxes due on the portion of that money which is considered to be above your basis. It is important that you consult with a tax professional prior to surrendering a whole life insurance policy.
