Term Vs Whole Life Insurance Calculator
Term and whole life both pay a death benefit, but they are priced very differently. Comparing them over the same number of years, and investing the difference, shows what the permanent cover really costs.
Difference invested over the period
$195,347.50
- Term monthly premium
- $25.00
- Whole life monthly premium
- $400.00
- Term cost over the period
- $6,000.00
- Whole life cost over the period
- $96,000.00
Values update as you type. This calculator covers the single scenario its formula assumes — see Common Mistakes for what it leaves out.
The formula this calculator uses
Difference invested = (whole premium - term premium) x future value of an annuity
- term
- Monthly premium for the term policy
- whole
- Monthly premium for the whole life policy
- years
- Period the two are compared over
- return
- Return earned on the invested difference
How to check the result by hand
- 1
Get both premiums for the same cover
Quote the same death benefit and the same health class on both products. Comparing a 250,000 term policy with a 500,000 whole life policy tells you nothing.
- 2
Set the comparison period
Use the term length, commonly twenty years, so both products are measured over the years the protection is actually needed.
- 3
Total the cost of each
Multiply each monthly premium by twelve and by the number of years to see what each policy costs over the period.
- 4
Invest the difference
Take the monthly gap between the two premiums and grow it at a realistic net-of-tax return using the future value of an annuity formula.
- 5
Compare against the cash value
Ask the insurer for the projected cash value of the whole life policy at the same date. The larger of the two figures is what you give up by choosing the other.
For worked examples, common mistakes and the limits of this formula, read the full How To Calculate Term Vs Whole Life Insurance page.