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Term vs Whole Life Insurance Calculator

Compare the true cost of term life versus whole life insurance.

How it is calculated

The tool asks what the extra whole-life premium would have grown to if you had invested it each year instead.

difference = whole premium − term premium (per year)
total paid = premium × years (for each policy)
invested value = difference × ((1 + r)n − 1) ÷ r

Premiums are annual dollar amounts, r is the yearly investment return as a decimal and n the number of years. The difference is assumed to be invested once a year, at year end, with annual compounding; at a 0% return it is just difference × years. The whole-life premium must be at least the term premium, premiums cannot be negative, years must be above 0 and at most 100, and a return below −100% is rejected; any of these shows no result. The tool does not estimate whole life's cash value or death benefit, it applies the same years to both policies (even if the term is shorter than your horizon) and ignores taxes on the investment. The invested value is the "buy term and invest the difference" side only.

Worked example

Term costs $400 a year and whole life $4,000 a year, over 20 years, with a 6% investment return. Total paid: term 400 × 20 = $8,000.00, whole life 4,000 × 20 = $80,000.00. The yearly difference is 4,000 − 400 = $3,600.00. Investing that each year at 6% for 20 years: 3,600 × ((1.0620 − 1) ÷ 0.06) = 3,600 × 36.7856 = $132,428.13. For comparison, you would put in only $72,000 of the difference yourself; the rest is growth. The tool does not tell you what the whole life policy's cash value would be after 20 years.

Try this example →

Common mistakes

  • Comparing the invested value directly with the whole life premiums paid. The result says only what the difference could grow to; the whole life policy's own cash value is not calculated, so the comparison is incomplete.
  • Assuming a term policy still covers you for the whole number of years entered. A 20-year term ends after 20 years; if you enter 30, the tool still prices term cover as if it lasted.
  • Entering a monthly premium. Both fields are annual; a $35 monthly premium must be entered as 420.
  • Putting the whole-life premium in the term box and the term premium in the whole-life box. If the whole-life figure is lower, the tool shows no result.
  • Using an optimistic return. A 10% return raises the invested result by more than half compared with 6% over 20 years, and real returns are not guaranteed. The result is also before tax and fees on the invested money.

About this calculator

Term life insurance provides pure death-benefit coverage for a fixed period (such as 20 or 30 years) at a much lower premium, while whole life insurance combines a death benefit with a savings component (cash value) that grows over the policyholder's lifetime, at a premium that is typically 5 to 15 times higher for the same coverage amount. The cost difference exists because whole life is designed to pay out eventually (since it lasts the insured's whole life) while term life only pays out if death occurs within the covered period, making term far cheaper to underwrite.

Insurance agents and financial planners commonly recommend a strategy known as 'buy term and invest the difference' — buying cheaper term coverage and investing the premium savings in the market — because market returns have historically outpaced the modest, tax-deferred growth rate on whole life cash value, though whole life appeals to buyers who want permanent coverage and forced, guaranteed savings.

This calculator compares total premiums paid for term versus whole life insurance over your chosen period and projects what investing the premium difference could grow to, so you can weigh the true cost of each option.

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