Term vs Whole Life Calculator
Find the annual return the premium difference would need to match a whole-life cash value — which is sometimes negative.
Take the cash value from the guaranteed column of the illustration, not the projected one — the projected figure is an assumption, and comparing it against a required return double-counts the optimism. This ignores tax treatment, which differs by product and country and can matter. Nothing is uploaded.
Ask what return the difference would need
Comparing a $600 premium against a $4,800 one tells you nothing, because they are not the same product: one is cover, the other is cover bundled with a savings account. The comparison that means something is to invest the $4,200 difference and ask what return it would need to match the policy's cash value at the end.
| If the cash value after 20 years is | The difference must earn | |
|---|---|---|
| $60,000 | -3.72% | cash under a mattress already beats it |
| $80,000 | -0.52% | cash under a mattress already beats it |
| $95,000 | 1.28% | |
| $120,000 | 3.60% | |
| $150,000 | 5.72% |
A negative required return is the row worth looking for. At $60,000 the answer is -3.72%, which means the difference left in a current account earning nothing at all still ends up ahead of the policy. You need no view on markets to settle that one. At $150,000 the required return is 5.72%, which is a real assumption about investing rather than a certainty — so "buy term and invest the difference" is not automatically right either, and it only works at all if the difference is genuinely invested rather than spent.
What the premium comparison hides
Over 20 years the term policy costs $12,000 and the whole-life policy
$96,000 — 8.0 times as
much. That figure is quoted constantly and it is incomplete in both directions. One of those
policies hands back a cash value, which at the upper end exceeds everything the term policy
ever cost. And the other one expires: the $600 buys 20 years
and then stops, while the whole-life cover does not.
Whether that matters depends on whether anyone still depends on your income in year
21 — which for most term buyers is the year the mortgage ends and the children
have left, and is exactly why the term was 20 years in the first place. The arithmetic
above cannot settle that part, and no calculator should pretend to. What it can do is tell you
whether the savings half of the bundle is competitive on its own terms, which is a question
with a number for an answer.
How to use
- Enter both premiums and the number of years.
- Take the cash value from the guaranteed column of the illustration.
- Read the return the difference would need to earn.
- Check whether that return is plausible, or negative.
Frequently asked questions
How do I compare term and whole life?
Not on premiums, because they are not the same product — one is cover, the other is cover bundled with a savings account. The comparison that means something is to invest the difference and ask what return it would need to match the policy cash value at the end.
What does a negative required return mean?
That the difference simply saved, earning nothing at all in a current account, ends up ahead of the policy. On a $4,200 annual difference over twenty years, any cash value under $84,000 is in that position. It is the most useful answer the calculator gives, because it needs no view on markets to act on.
Is "buy term and invest the difference" always right?
No. At a $120,000 cash value the difference would need 3.6% a year, which is a real assumption about investing rather than a certainty. And it only works at all if the difference is genuinely invested rather than absorbed into spending, which is the part the advice tends to skip.
Which cash-value figure should I use?
The guaranteed column, not the projected one. The projected figure is itself an assumption about returns, so comparing it against a required return double-counts the optimism and flatters the policy.
Why does the answer swing so much?
Because it turns almost entirely on the cash value, which is the one number the illustration chooses. Moving it from $80,000 to $120,000 takes the required return from below zero to 3.6% — from "a current account beats this" to "you would need a decent portfolio".
What does the premium comparison miss?
Two things, pulling opposite ways. The whole-life policy hands back a cash value, which at the upper end exceeds everything the term policy ever cost. And the term policy expires: it buys twenty years and then stops, while whole life does not.
Does the term expiring matter?
It depends on whether anyone still relies on your income afterwards — which for most term buyers is the year the mortgage ends and the children have left, and is exactly why the term was that length. The arithmetic here cannot settle that, and no calculator should pretend to.
Does this send anything anywhere?
No. Every figure is computed in your browser, and nothing is uploaded or stored.
🔒 This tool runs entirely in your browser. Nothing you enter is uploaded, logged, or stored.