Whole Life vs Term Cost Calculator
Compare the lifetime cost of a whole life policy against buying term and investing the premium difference over the same period.
How it works
Term cost = term premium × years · Side fund = Σ (whole premium − term premium) grown at r · FV = PMT × ((1+r)ⁿ − 1) ÷ r
"Buy term and invest the difference" is the classic case against whole life: term insurance costs a fraction of a whole life premium for the same death benefit during your working years, and disciplined investing of the saved premium can out-accumulate the policy's cash value. Whole life's advantages — lifelong coverage and forced savings — matter most if you need a permanent death benefit or would not otherwise invest. This tool only compares the premium math; it does not model the policy's guaranteed cash value or dividends.
Worked example
A $500,000 policy costs $600/yr as term and $6,000/yr as whole life. Over 30 years term costs $18,000 total, while the $5,400 annual difference invested at 7% grows to about $510,000 — roughly the size of the death benefit itself.
Frequently asked questions
Is term or whole life better?
For most people with a temporary need — covering a mortgage or raising children — term is far cheaper and the saved premium can be invested. Whole life makes sense when you need guaranteed lifelong coverage or an estate-planning tool, and accept paying much more for it.
Does this include the whole life cash value?
No. This compares premiums only and grows the difference in a side investment. A full comparison would also credit the whole life policy's guaranteed cash value and any dividends, which build slowly in the early years.
What return should I assume?
Use a realistic long-run figure for a diversified portfolio — often 5% to 7% after inflation. Lower assumptions narrow the gap between the two strategies.
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Educational estimate, not insurance or financial advice — real premiums and coverage depend on underwriting, your state and the specific policy.