Insurance
Term vs. Whole Life Cost
Set buying term and investing the difference beside a whole life policy's cash value, with total premiums each way.
What this means
At an assumed 6% return, investing the $415 a month you'd save with term grows to about $191,747 by the end of the 20-year term. That's $66,747 more than the $125,000 cash value you entered. The investing side needs about 2.2% a year just to match it.
The comparison isn't the whole story. When the term ends, so does that $500,000 of coverage, and buying more later costs more as you age. Whole life keeps its death benefit for life and carries guarantees written into the contract. Investing only works if the difference really gets invested every month, and its growth may be taxed depending on the account.
The return you entered is an assumption, not a promise, and the cash value comes from an illustration that usually shows a lower guaranteed figure next to the projected one. Run both. These are estimates, not advice; a licensed professional can walk through the policy itself.
Build on it
These are estimates to help you think, not personalized legal, tax, or investment advice, and not a promise of any result.
This calculator compares two ways to pay for the same life insurance coverage over a term. One is buying term and investing the difference between the two premiums every month. The other is buying whole life and keeping the cash value its illustration projects. It shows both balances at the end of the term, the total premiums each way, and the return investing would need just to match.
Why it matters: whole life costs far more per month than term for the same death benefit, and the cash value is part of what that extra pays for. Whether investing the difference yourself would come out ahead depends on a return no one can promise and on whether the money actually gets invested. This puts your quotes and your assumption side by side so the trade is visible.
How to use it
Enter two quotes for the same coverage
The coverage amount and the monthly premium for a term policy and a whole life policy at that same amount. Quotes for different coverage would make the comparison meaningless.
Enter the cash value from the illustration
Whole life illustrations list the cash value year by year. Use the year your term would end. Most show a guaranteed column and a higher projected one; try both.
Set a return you would actually expect
The return on the invested difference is your assumption. Run a cautious figure as well as a hopeful one, and look at the break-even return the calculator reports.
Behind the numbers
What each side really buys
Term pays a death benefit only during the term and then ends. Whole life keeps its death benefit for as long as premiums are paid, builds cash value and carries guarantees written into the contract. They are different products, so the numbers are a comparison of cost, not a verdict.
Buy term and invest the difference
The idea is to pay the lower term premium and invest what whole life would have cost on top of it. It only works if the difference really is invested every month, for the whole term. The result depends on a return that is an assumption, not a promise, and growth may be taxed depending on the account.
The break-even return
The calculator finds the yearly return the invested difference would need to equal the cash value. A low break-even means investing does not need much to come out ahead; a high one means the cash value is hard to beat on these quotes.
The math behind it
The monthly difference is the whole life premium minus the term premium. That amount is invested at the end of each month and grows at your assumed yearly return divided by twelve, compounded monthly, for the length of the term. The result is set beside the whole life cash value at the same point. Total premiums are each monthly premium times the number of months.
Worked example
$500,000 of coverage at $35 a month for 20-year term or $450 a month for whole life. The $415 difference, invested for 20 years at an assumed 6%, grows to about $191,747 from $99,600 of deposits. If the illustration shows $125,000 of cash value at year 20, investing comes out about $66,747 ahead at that return, and it would need about 2.2% a year just to match. Total premiums: $8,400 for term, $108,000 for whole life.
Ask what you would have to believe
Look at the break-even return before the final balances. If the investing side only needs a low return to match, the cash value is not doing much for the extra premium. If it needs a high one, the whole life numbers deserve a closer look.
Common questions
Is term or whole life insurance better?
For many working families who need a large amount of coverage for a set number of years, term delivers the most coverage per dollar. Whole life can fit people who want lifelong coverage, contractual guarantees or certain estate plans. Have a licensed professional review the actual policy before you decide.
Does buy term and invest the difference always win?
No. It depends on the return you get, whether you invest the full difference every month, taxes on the investments, and the cash value in your specific policy. The calculator shows the break-even return so you can judge how likely it is.
What happens when the term ends?
The term coverage stops. If you still need coverage then, a new policy will cost more because you are older, and health changes can make it harder to get. Whole life coverage continues. Part of the comparison is whether you expect to need coverage after the term.
Where do I find the cash value?
In the policy illustration the agent or insurer gives you, listed by policy year. Use the year matching your term length, and compare the guaranteed figure as well as the projected one.
Go deeper
The calculator gives you a number. The Life Insurance Brick teaches you what to do with it, in plain English. And if you’re not sure where to start, the free BrickScore Assessment checks your whole foundation in about 5 minutes.
first the number, then the move