Help on understanding a formula an insurance administrator uses to calculate an annulized cash value
I need help to understand universal life calculations. The policy has an annualized cash value interest rate of 4%. My husband paid on this policy for over 27 years. He recently passed away. Lots of issues with the administrator of the policy including being evasive and not returning calls. It appears we did not receive all interest on the policy. I was informed..."the concept is to never pay interest on the policy" I asked for a printout of all payments as the annual statements show there is interest at 4%. With that and after months along with the threat of going to insurance commissioner, etc...I got a printout for all years in .pdf form. Interest vanishes at times and/or not given some months.
So I asked how it was calculated and posted on a monthly basis. I got this response after another long wait...and three requests for answers.
((((1+i)^(m/12))-1)*P
i=interest rate to yield,
m=number of months,
p=principal
Can you help me shed any light on how I can figure it out? Do you recognize this type of formula? Thank you in advance.
That is a basic formula for
That is a basic formula for calculating the increase of your principal given an interest rate and an amount of time. Another way to look at it is this:
(P(1+i)^t)-P equals Gaines from Interest.
Where P(1+i)^t is the total value of your investments after t years.
If you use $10 as P, with a 4% interest rate over 10 years you will get the following:
P(1+i)^t
10(1+.04)^10
Equals 14.80244285
Then subtract P to get your gains:
4.80244285
You can use the same numbers in the formula they provided and arrive at the same answer:
((1+.04)^(120/12))*10
Equals 4.80244285
If you want to learn more about this look up time value of money, future value and present value calculations.
Let me know if you need any clarification!
-Max