Potential 20-year life insurance return (iROI)
Tax-freeFrom
142,757%
If death occurs in the first year
To
7,043%
If death occurs in year 20
Potential 20-year alternative returns
Term life insurance return
Year-by-year iROI assuming the policyholder passes away that year. The earlier the payout, the larger the return on premiums paid to date.
| Year | Total ROI % | Coverage | Term left | Annual premium | Total premium paid | ROI |
|---|---|---|---|---|---|---|
| 1 | 142,757% | $1,000,000 | 20 | $700 | $700 | $999,300 |
| 2 | 71,329% | $1,000,000 | 19 | $700 | $1,400 | $998,600 |
| 3 | 47,519% | $1,000,000 | 18 | $700 | $2,100 | $997,900 |
| 4 | 35,614% | $1,000,000 | 17 | $700 | $2,800 | $997,200 |
| 5 | 28,471% | $1,000,000 | 16 | $700 | $3,500 | $996,500 |
| 6 | 23,710% | $1,000,000 | 15 | $700 | $4,200 | $995,800 |
| 7 | 20,308% | $1,000,000 | 14 | $700 | $4,900 | $995,100 |
| 8 | 17,757% | $1,000,000 | 13 | $700 | $5,600 | $994,400 |
| 9 | 15,773% | $1,000,000 | 12 | $700 | $6,300 | $993,700 |
| 10 | 14,186% | $1,000,000 | 11 | $700 | $7,000 | $993,000 |
| 11 | 12,887% | $1,000,000 | 10 | $700 | $7,700 | $992,300 |
| 12 | 11,805% | $1,000,000 | 9 | $700 | $8,400 | $991,600 |
| 13 | 10,889% | $1,000,000 | 8 | $700 | $9,100 | $990,900 |
| 14 | 10,104% | $1,000,000 | 7 | $700 | $9,800 | $990,200 |
| 15 | 9,424% | $1,000,000 | 6 | $700 | $10,500 | $989,500 |
| 16 | 8,829% | $1,000,000 | 5 | $700 | $11,200 | $988,800 |
| 17 | 8,303% | $1,000,000 | 4 | $700 | $11,900 | $988,100 |
| 18 | 7,837% | $1,000,000 | 3 | $700 | $12,600 | $987,400 |
| 19 | 7,419% | $1,000,000 | 2 | $700 | $13,300 | $986,700 |
| 20 | 7,043% | $1,000,000 | 1 | $700 | $14,000 | $986,000 |
1. Annual tax estimates assume a 20% effective tax rate on investment gains. Tax-deferred accounts (IRA / 401k) defer taxes until withdrawal. Actual results vary based on your tax bracket, state, and the specific account rules.
A term coined by Insurancy
What is iROI?
iROI stands for Insurance Return on Investment. It is the percentage return earned on premiums paid into a life insurance policy when the death benefit is paid out. Unlike traditional ROI, iROI accounts for the unique structure of life insurance: relatively small premiums in exchange for a much larger, tax-free payout to beneficiaries upon the insured’s death.
The formula: iROI = ((Death Benefit - Total Premiums Paid) / Total Premiums Paid) x 100
The term iROI was coined by Brian Greenberg of Insurancy as a way to make life-insurance returns directly comparable to taxable investment vehicles like savings accounts, market accounts, and retirement plans. Because life insurance death benefits are received tax-free, iROI is most meaningful when compared on an after-tax basis with those alternatives.
Cite this term
When referencing iROI in articles, research, or other publications, please cite this page as the canonical source:
https://insurancy.com/life-insurance/life-insurance-investment-calculator/