Corporate-Owned Life Insurance After-Tax Yield

Blend policy premiums, death benefit assumptions, tax leakage, and policy charges to see the after-tax internal rate of return your corporation earns on a COLI or BOLI contract and benchmark it against taxable investment alternatives.

Level premium paid with after-tax corporate dollars each policy year.
Gross death benefit expected to be received by the corporation.
Marginal combined federal and state corporate income tax rate.
Expected number of years premiums will be paid before the benefit is realized.
Defaults to 0%. Use to approximate corridor charges or policy expenses that reduce proceeds.
Defaults to 0%. Enter the share of proceeds treated as taxable income due to §101(j) non-compliance or gain recognition.

This calculator simplifies complex COLI tax rules. Work with insurance counsel and tax advisors before executing a policy purchase or exchange.

Examples

  • $250,000 premium, $10,000,000 death benefit, 21% tax rate, 15-year hold, 2% haircut, 0% taxable ⇒ After-tax proceeds $9,800,000.00 USD • Total premium outlay $3,750,000.00 USD • After-tax IRR 12.62% • Taxable-equivalent yield 15.98% • After-tax benefit multiple 2.61x • Net gain after tax $6,050,000.00 USD.
  • $180,000 premium, $4,000,000 death benefit, 28% tax rate, 12-year hold, 0% haircut, 15% taxable portion ⇒ After-tax proceeds $3,832,000.00 USD • Total premium outlay $2,160,000.00 USD • After-tax IRR 9.93% • Taxable-equivalent yield 13.79% • After-tax benefit multiple 1.77x • Net gain after tax $1,672,000.00 USD.

FAQ

How are policy loans reflected in this model?

Loan activity is not modeled explicitly. Increase the haircut percentage to reflect outstanding loan balances or accrued interest that will reduce the net death benefit.

Can I model single-pay policies?

Yes. Enter the single premium as the annual outlay and set the holding period to 1 to evaluate the after-tax IRR on a one-time contribution.

What if the corporation receives experience credits?

Reduce the premium input by the expected credit or enter a negative haircut percentage to reflect credits that boost the net proceeds.

How should I handle surrender cash values?

Replace the death benefit with the expected surrender value and set the taxable portion to the recognized gain if you want to evaluate an exit before mortality.

Additional Information

  • Premium payments are modeled as level, end-of-year cash outflows funded with after-tax corporate dollars.
  • The haircut field approximates corridor charges, cost of insurance, or policy loans that reduce the net death benefit before taxes.
  • The taxable portion input captures §101(j) non-compliance or other gain recognition so you can measure the remaining after-tax benefit.
  • Taxable-equivalent yield divides the after-tax IRR by (1 − tax rate), allowing direct comparisons with taxable bond portfolios or corporate cash investments.
  • The benefit multiple shows how many dollars of after-tax proceeds the corporation receives for every dollar of premium paid.

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