- Estimated term premium / month
- $32.00
- Estimated whole-life premium / month
- $575.00
- Monthly difference
- $543.00
- Total term premiums over 20 yrs
- $7,680
- Total whole-life premiums over 20 yrs
- $138,000
- Amount you would pay extra for whole life
- $130,320
For whole life to match buy-term-and-invest, its cash value at year 20 would need to reach about $252,143. Assumes a steady 6% return and premiums that stay level.
The comparison
Buy-term-and-invest-the-difference works like this: take the monthly saving from choosing term, invest it every month at your assumed return, and compare the accumulated balance at the end of the period. We compute that balance and also show the cash value a whole-life policy would have to reach to match it.
Premium assumptions
Term rates start around $6.40 per month per $100,000 at 35 rising sharply after 50. Whole-life policies typically cost roughly 15 to 20 times as much for the same death benefit at the same age, because part of every payment funds a cash-value account and the guarantee lasts your whole life.
What this does not capture
Term cover expires, and renewing at 65 is expensive or impossible if your health has changed. Whole-life cash value grows tax-deferred and cannot be outlived. This page compares money only — it is not advice about which structure fits your situation.
Frequently asked questions
Why is whole life so much more expensive?
Because it is permanent cover with a guaranteed cash-value component. You pay for a guarantee that the policy cannot lapse as long as premiums are made, whatever happens to your health.
What return should I assume?
Something close to a long-run, diversified portfolio assumption, typically 5 to 7 percent. Higher assumptions make the term-plus-invest strategy look far better, so be conservative.
Does term insurance ever pay out?
Most term policies expire without a claim, which is exactly why term is so cheap. That is the trade-off: low cost, no cash value, cover that ends.