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.

Tested against worked examplesHow we verify

Term premium (monthly)

For a level term policy matching the coverage you need.

Whole life premium (monthly)

Years to compare

Return on the invested difference

Whole life cash value at the end

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

Invested difference$140,65064%

Whole life cash value$80,00036%

Compare scenariosTry three values of one input

Vary

Term vs Whole Life Insurance Calculator results for three values of Term premium (monthly)
Term premium (monthly)
Buy term and invest, ahead by	$63,255	$60,650−$2,605	$58,046−$5,209
Invested difference grows to	$143,255	$140,650−$2,605	$138,046−$5,209
Monthly amount invested	$275	$270−$5	$265−$10
Total term premiums paid	$6,000	$7,200+$1,200	$8,400+$2,400

Every other input stays at the value you set above — currently $30 for term premium (monthly). Differences are measured against the first column.

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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.

What this assumes

The premium difference is assumed invested at the return you enter — the 'buy term and invest the difference' comparison only holds if the difference genuinely is invested.
Whole life cash value grows at the credited rate entered, after the policy's own costs and commissions, which are front-loaded.
Surrender charges in the early years and the effect of policy loans on the death benefit are not modelled.

What changes this number

Whether the difference is invested: The whole comparison. If it would be absorbed into spending, permanent cover's forced saving is worth more than the arithmetic shows.
How long the need lasts: A temporary need — children at home, a mortgage outstanding — is what term is shaped for.
Commission structure: Far higher on permanent policies than on term, which is a reason to ask how the person advising you is paid.

A worked example

Take the $30 term vs $300 whole, 20 years scenario. These figures are produced by the calculator above, not written alongside it, so they always match what the tool returns.

What you enter

Term premium (monthly): $30
Whole life premium (monthly): $300
Years to compare: 20 years

What it returns

Buy term and invest, ahead by: $60,650
Invested difference grows to: $140,650
Whole life cash value: $80,000
Monthly amount invested: $270
Total term premiums paid: $7,200

Try an example

$30 term vs $300 whole, 20 years A conservative 5% return A strong cash value

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.