Term vs Whole Life Insurance Calculator
Compare the total cost of term life insurance vs whole life insurance over time, including the "buy term, invest the difference" strategy.
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How to use this calculator
The future value of investing the monthly premium difference uses the standard annuity-due formula compounded monthly, where PMT is the monthly difference, r is the monthly rate, and n is the total months.
- 1
Enter your desired coverage amount, current age, and the term length you are comparing (e.g. 20 years).
- 2
Enter the monthly premium quotes for both the term policy and the whole life policy from your insurer.
- 3
Set an expected annual investment return to see how much the premium difference could grow if invested instead.
Frequently asked questions
What is "buy term and invest the difference"?
This strategy involves buying the cheaper term policy and investing the money you would have spent on whole life premiums. The idea is that disciplined investing can outperform the cash value growth built into whole life policies.
Does whole life insurance have any advantages?
Yes. Whole life provides lifelong coverage, guaranteed cash value growth, tax-deferred accumulation, and can be used as collateral for loans. It may suit high-net-worth individuals using it for estate planning or those who want forced savings.
Why are whole life premiums so much higher?
Whole life premiums cover the cost of insurance plus fund a cash value account managed by the insurer. Part of each premium is invested conservatively, building a tax-deferred reserve you can borrow against or surrender.
Term Life vs Whole Life: Which Is Right for You?
The Core Difference Between Term and Whole Life
Term life insurance provides pure death benefit protection for a fixed period — typically 10, 20, or 30 years. It is straightforward and affordable. Whole life insurance is permanent coverage that never expires and includes a cash value component that grows over time. The trade-off is cost: whole life premiums are often 5–15 times higher than term for the same coverage amount.
"Buy Term, Invest the Difference" — Does It Work?
The popular personal finance strategy of buying term and investing the premium difference can result in a significantly larger nest egg if followed consistently. This calculator shows the potential future value of that invested difference. However, this strategy requires discipline — the savings must actually be invested rather than spent. Whole life may still be preferable for those who benefit from its forced savings structure, permanent coverage, or estate planning advantages.
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Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →