Cost of Insurance Calculator for Universal Life (COI)
Works out the monthly cost of insurance (COI) charge on a universal life policy the way policies define it: the net amount at risk, which is the death benefit minus the account value, divided by 1,000 and multiplied by the COI rate in your policy. Add your monthly fee and premium load to see how much of each premium reaches the cash value. Rates are yours, not estimates.
The cost of insurance (COI) is the ongoing charge a universal life or variable universal life policy deducts to pay for the death benefit. It is not a fixed premium: each month the insurer multiplies its current COI rate by the net amount at risk, the part of the death benefit not already covered by the policy's own account value, and takes the result out of that account value.
Cost of Insurance Calculator: the Formula
Policy prospectuses filed with the SEC set the calculation out in the same basic form: the monthly cost of insurance charge equals the cost of insurance rate multiplied by the net amount at risk divided by 1,000. The net amount at risk is the death benefit minus the policy's accumulation (account) value. Some policies also divide the death benefit by a small monthly discount factor first; this calculator leaves that refinement out.
| Item | Where to find it | Example |
|---|---|---|
| Death benefit | Policy specifications or annual statement | $500,000 |
| Account value | Annual statement | $60,000 |
| Net amount at risk | Death benefit minus account value | $440,000 |
| COI rate per $1,000 per month | Annual statement, or ask the insurer for the current rate | $0.25 |
| Monthly COI charge | 440 x $0.25 | $110.00 |
Worked Example
A policy has a $500,000 death benefit and a $60,000 account value, so the net amount at risk is $440,000, or 440 units of $1,000. At a COI rate of $0.25 per $1,000 the monthly charge is $110, or $1,320 a year. If the owner pays $400 a month with a 5% premium load ($20) and a $10 monthly fee, total charges are $140 and $260 is left to build the account value. If the rate later doubles to $0.50, the COI alone becomes $220 a month and only $150 of the same premium reaches the account value.
Why the Charge Changes Over Time
The SEC's investor bulletin on variable life insurance explains that the cost of insurance varies for each insured based on factors including age, gender, health and the death benefit amount, and that it compensates the insurer for providing the death benefit. As you age, the cost to insure you is likely to increase. Policies also carry administration fees, sales charges on premiums and surrender charges in the early years. If the cash value is not enough to pay the current fees and expenses, the policy may lapse, meaning it terminates.
What This Calculator Does Not Do
It contains no mortality table and no insurer's rate card. The COI rate differs by company, product, age, sex, underwriting class and policy year, and a policy's specifications list the guaranteed maximum rates the insurer may charge, so any built-in "typical" rate would be a guess. Enter the rate from your own statement or an in-force illustration.
Source and Disclaimer
General education, not insurance or investment advice. Ask your insurer for an in-force illustration before changing premiums or replacing a policy.
Sources: SEC Office of Investor Education and Advocacy — Investor Bulletin: Variable Life Insurance (Oct. 30, 2018); cost of insurance formula as set out in a flexible premium variable life prospectus filed with the SEC. Last updated: October 2026.