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Term vs Whole Life Insurance Calculator

Test whether buying term life and investing the premium difference beats a whole life policy's cash value.

Reviewed Calculation inputs stay in your browser

Compare up to three snapshots of inputs and headline results. Snapshots clear when you leave this page.

Start from
Your quotes

Use quotes for the same death benefit.

Usually the length of the term policy.

From the policy illustration. Use the guaranteed column for a cautious view.

Investing the difference

Set to 0 if invested in a tax-advantaged account.

Term + investing comes out ahead by

$122,599

After 30 years, if the $410/mo difference is invested every month without fail.

Buy term, invest the difference

Invested each year$4,920
Portfolio before tax$412,304
Portfolio after tax on gains$372,599

Whole life

Cash value (your illustration)$250,000
The comparison assumes you really invest the difference. If the money would be spent instead, whole life’s forced saving has real value. Be honest about which describes you.
What this leaves out. Whole life coverage continues after the term ends, and its cash value may be borrowed against or grow tax-deferred, with dividends that are not guaranteed. Term coverage that is still needed later can be expensive to renew. Surrender charges apply if whole life is cancelled early. For larger or estate-related decisions, a fee-only adviser who does not earn commission can help.

How this is calculated

Both strategies spend the same amount each year. The term buyer invests the difference between the two premiums at the start of each year, and the portfolio grows at the annual return you enter. Tax on investment gains is subtracted at the end, so the result can be compared fairly with the policy’s cash value.

The whole life figure is the cash value you enter from your own policy illustration. This tool does not estimate cash values, because they vary widely between policies and insurers.

Not included: coverage after the term ends, policy loans, dividends beyond your illustration, surrender charges, and inflation. Further reading: NAIC: Life insurance consumer guide.

Common questions

›What is the difference between term and whole life insurance?

Term life covers you for a set period, such as 20 or 30 years, and pays only if you die in that time. Whole life lasts for your entire life and builds a cash value, but costs much more for the same death benefit.

›What does buy term and invest the difference mean?

You buy the cheaper term policy and invest the money you would otherwise have spent on whole life premiums. The comparison asks whether that investment ends up worth more than the whole life policy's cash value.

›Where do I find the whole life cash value?

In the policy illustration the insurer provides. It shows guaranteed values and higher projected values that depend on dividends. The guaranteed column is the cautious figure to use.

›When does whole life make sense?

When you need lifelong coverage, such as for estate planning or a dependent who will always need support, or when you would not reliably invest the difference yourself. It is worth getting advice from a fee-only adviser who is not paid commission on the policy.

Worked example

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