Term vs whole life cost.

Worked example

Term costs $500 a year for 20 years and whole life costs $5,000 a year, so the yearly gap is $4,500. Over 20 years you would pay $10,000 for term and $100,000 for whole life. If you invested the $4,500 at the end of each year at 5%, it would grow to $148,797. If the whole life illustration shows $70,000 of cash value in year 20, buy-term-and-invest is ahead by $78,797 on those assumptions. Both figures depend on the numbers you enter.

How it works

Each year the invested difference is last year’s balance x (1 + return) + (whole life premium - term premium). Once the term ends the term premium is 0, so the full whole life premium is the difference. It is then compared with the cash value you type in, which you take from the insurer’s illustration. Term insurance is described as generally cheaper, temporary and without cash value; whole life as pricier, permanent and building cash value.

Sources and basis (opened 2026-10-08): arithmetic on the quotes, cash value and return you enter; no market rates are used. General description of term and whole life from NerdWallet, “Term Life vs. Whole Life Insurance: Key Differences and How To Choose”.

FAQ

Is term or whole life insurance cheaper?

Term life is generally the cheaper of the two, and whole life is significantly more expensive for the same death benefit, according to NerdWallet. Enter your own two quotes to see the exact gap.

What does buy term and invest the difference mean?

You buy the cheaper term policy and invest the money you save compared with a whole life premium. The calculator grows that yearly difference at the return you assume and compares it with the whole life cash value.

Where do I find the whole life cash value?

The insurer’s policy illustration lists projected cash value by year. Enter the figure for the year you are comparing.

What happens when the term ends?

Term cover stops. In this comparison the term premium becomes 0 after the term, so the full whole life premium is invested, but you would have no term death benefit in those years.

Does this tell me which to buy?

No. It compares cost on the numbers you enter. Your health, how long you need cover and whether you will really invest the difference all matter, so speak to a licensed advisor.