The Truth About Life Insurance Returns

Life insurance often gets promoted as a financial tool that delivers impressive returns. Online, you’ll see people claiming 6%, 8%, or even 14% growth inside their policies. It sounds like a smart, low-risk investment until you look closer.

The truth is that those numbers rarely represent what policyholders actually earn. The advertised figures are often inflated or incomplete, leaving out key details about how cash value life insurance really grows.

Why the Numbers Don’t Tell the Whole Story

When people talk about earning 6%, 8%, or 14% on a life insurance policy, they are usually referring to the gross rate of return. That number comes before any insurance costs, administrative fees, or mortality charges are subtracted. It may look attractive, but it does not reflect the true growth of your policy.

The real performance is measured by the internal rate of return, also known as the IRR. This shows what your money actually earns after all costs have been accounted for.

If a policy shows a gross return of 6%, your true return might be closer to 4%. At 8% gross, the real number could be around 5%. The difference depends on policy design, funding level, and carrier performance. The gross number is marketing. The internal rate of return is reality.

Why the Internal Rate of Return Is What Matters

Your internal rate of return tells you how effectively your dollars are compounding over time. It reflects the net growth of your cash value, not the projections shown in a sales presentation.

This concept is no different from investing in the market. An investment fund might claim an average return of 10%, but the actual investor could earn far less after fees and down years. Life insurance functions the same way. The net number is what determines real results.

When you understand your internal rate of return, you can measure whether your policy is doing what it was designed to do. It should provide safe, predictable growth over time, not inflated expectations.

Questions to Ask Before You Buy or Review a Policy

If you already own a policy or are considering one, ask your advisor to show you the internal rate of return year by year. The early years will appear low because of initial policy expenses, but the longer you hold the policy, the more stable and consistent the growth becomes.

Asking this question separates marketing from measurable performance. It also ensures your policy is designed for long-term value, not short-term appearance.

Understanding What You’re Actually Building

Cash value life insurance was never meant to be a high-return investment. It is a slow, steady, and guaranteed financial foundation. Its purpose is to preserve wealth, provide liquidity, and create certainty, not to compete with speculative growth products.

Knowing the difference between gross and net returns helps you understand what your policy truly provides: safety, predictability, and lifetime access to capital.

Truth Before Numbers

The biggest misunderstanding about life insurance returns is not in the math itself but in what gets left unsaid. When you understand how returns are actually calculated, you can evaluate your policy with confidence and clarity.

If you want to learn how to analyze your current policy or build one designed for real, measurable growth, book in a call today.