Insurance
Term vs Whole Life Insurance Calculator
Whole life bundles insurance with a savings account, and charges for both. Term insurance costs a fraction as much. The classic question is whether investing the premium difference yourself beats the whole-life policy's cash value — and usually, over a long horizon, it does.
For a level term policy matching the coverage you need.
From the policy's illustration for that year — the guaranteed column, not the projected one.
Buy term and invest, ahead by
$60,650
Invested premium difference versus the policy's cash value at your horizon.
Buying term and investing the difference wins here — but only if you actually invest the difference every month and leave it alone. That discipline is exactly what whole life enforces for people who lack it, which is the honest case for the more expensive policy.
- Invested difference grows to
- $140,650
- Whole life cash value
- $80,000
- Monthly amount invested
- $270
- Total term premiums paid
- $7,200
- Total whole life premiums paid
- $72,000
How this calculator works
The monthly difference between the two premiums is invested at your assumed return over the horizon, compounding monthly. That result is compared with the whole-life cash value you enter from the policy illustration. Total premiums for each policy are shown so you can see what each costs regardless of the investment outcome.
The comparison covers cash value and invested savings, not the death benefit, which both policies provide during the term. It assumes the difference is actually invested every month — the single biggest reason real outcomes fall short. Use the guaranteed cash value, not the projected one, and note that surrendering whole life can trigger tax on gains.
Try an example
Frequently asked questions
Is term or whole life insurance better?
For most people with a temporary need — a mortgage, young children, a working spouse — term is far cheaper and covers exactly the years that matter. Whole life costs roughly ten times as much because it bundles a savings account. Buying term and investing the difference usually builds more wealth, if you have the discipline to invest it.
What is 'buy term and invest the difference'?
Buy inexpensive term insurance for the coverage you need, and invest the money you would have spent on a whole-life premium. Over a long horizon a diversified portfolio typically beats whole life's cash value, which grows slowly after front-loaded costs and commissions in the early years.
When does whole life make sense?
When you have a genuinely permanent need — a lifelong dependent, estate liquidity to pay taxes, or a business buy-sell agreement — or when you would not otherwise invest the difference. The forced savings and the tax-deferred growth have real value for the right person; they are just oversold to the wrong one.
Why is whole life's cash value low in the early years?
Because the first years' premiums largely cover the agent's commission and the insurer's costs. Cash value often barely exists for the first several years and can take a decade to exceed premiums paid. Surrender the policy early and you lose money — which is why whole life only rewards holding it for life.
What return should I assume for the difference?
A long-run diversified portfolio has historically returned around 7% before inflation, though with real volatility. Whole life's guaranteed cash value grows far slower — often 2–4%. Use the guaranteed column of the policy illustration for the comparison, since projected dividend figures are not promised.
Related calculators
Life Insurance Needs Calculator
How much life insurance do you need? Add up income replacement, the mortgage, debts, and education, subtract what you already have, and see the coverage gap.
Investment Calculator
Project an investment portfolio's growth with monthly contributions — final value, your money vs market growth, and the year-by-year path.
Disability Insurance Calculator
Work out whether your group disability coverage would actually pay the bills — including the tax that applies when your employer pays the premium — and the monthly gap left over.
Roth IRA Calculator
Project your Roth IRA's tax-free value at retirement and see how much of it is earnings you'll never pay tax on. Uses the 2026 limit of $7,500.
Disclaimer: DayCents provides this calculator for educational purposes only. Results are estimates based on your inputs and the stated assumptions — they are not financial advice, a quote, or an offer of credit. Consult a qualified financial professional before making major money decisions.