What is a break-even point in life insurance?
The break-even point marks the moment when your life insurance policy’s accumulated cash value equals the total amount you’ve paid in premiums. From this point forward, your policy technically holds more value than what you’ve put in.
Break-even is a useful benchmark for evaluating policy performance — but it’s not a guarantee of long-term success. Just like a 401(k) or Roth IRA, it takes time, consistent contributions, and favorable conditions to reach this point.
When does whole life insurance break even?
In a typical whole life policy, the break-even point often occurs between years 12 and 18, depending on how the policy is structured.
Whole life insurance offers guaranteed growth based on fixed interest rates and potential dividends. That predictability comes with high costs up front — which means it can take over a decade for the cash value to catch up with what you’ve paid.
Age when policy starts | Break-even year | Total premiums paid | Projected cash value |
|---|---|---|---|
30 | Year 13 | $65,000 | $65,500 |
40 | Year 15 | $75,000 | $75,200 |
50 | Year 17 | $85,000 | $85,100 |
Methodology: Policygenius internal estimates based on 2025 data. Assumes healthy nonsmoker with level annual premium payments and dividend reinvestment.
When does indexed universal life (IUL) break even?
Indexed universal life insurance (IUL) ties cash value growth to the performance of a stock market index (like the S&P 500), subject to caps and floors.
That market exposure means IUL policies can break even slightly earlier than whole life — often in years 10 to 15 — but also come with greater volatility and no guarantees.
Age when policy starts | Break-even year | Total premiums paid | Projected cash value |
|---|---|---|---|
30 | Year 11 | $55,000 | $55,300 |
40 | Year 13 | $65,000 | $65,100 |
50 | Year 15 | $75,000 | $75,300 |
Disclaimer: These projections are illustrative and not guaranteed. Actual performance depends on the insurer’s cap rates, participation rates, fees, and index behavior.
What affects your break-even timeline?
Several factors influence how quickly your policy breaks even:
Age and health at purchase — Younger, healthier applicants tend to break even faster
Policy type — Whole life offers slow, steady growth; IUL can grow faster but is riskier
Premium size and frequency — Overfunding can accelerate cash value growth
Dividend performance (whole life) or market returns (IUL)
Policy fees and loan activity — High internal charges can delay break-even
Why the break-even point matters – and when it doesn’t
Understanding your break-even point helps answer one of the most important questions in permanent life insurance: Is this policy doing what I expect it to?
If you’re hoping to tap into your policy’s value to fund college tuition, supplement retirement, or serve as a financial cushion, reaching break-even is often the first milestone. It shows that the policy is accumulating usable value.
But break-even isn’t everything. Some policies never reach this point — and that may still be okay if your priority is guaranteed death benefit or estate planning. Just make sure your expectations align with your policy’s design.
Pros and cons of using cash value as an investment
Pros | Cons |
|---|---|
Potential for tax-deferred growth | Slow to break even — often 10+ years |
May allow loans or withdrawals | Early withdrawal can trigger penalties |
Death benefit protection remains | Complex and expensive compared to other vehicles |
Not counted as an asset on FAFSA | Market or dividend performance is not guaranteed |
Disclaimer: Life insurance policies are not investment products and should not be treated as such. Any tax advantages depend on policy compliance and individual circumstances.
Bottom line
Breaking even on a whole or IUL policy takes time — and patience. If you’re focused on long-term goals and value tax-deferred growth, understanding when (and if) your policy becomes cash-flow positive can help you evaluate whether it fits your financial strategy.
Permanent life insurance isn’t for everyone — and break-even isn’t the only metric that matters. But if you’ve already maxed out other savings options and want both protection and growth, it may be worth exploring.
Methodology: Policygenius reviewed internal life insurance product data from top-rated providers using 2025 pricing estimates. Cash value growth assumptions were benchmarked against carrier dividend histories, IUL cap rates, and indexed performance data from Morningstar. Tables reflect projections for healthy nonsmoking adults based on level premium payments and no withdrawals or loans.
References
National Association of Insurance Commissioners (NAIC)
Society of Actuaries
Morningstar IUL Index Performance Data
Policygenius product analysis database (2025)
IRS Publication 525 & 970