Term vs. Whole Life Calculator

Term life insurance provides a death benefit for a fixed period, typically 10 to 30 years, at a lower premium. Whole life insurance provides lifetime coverage and includes a cash value component that grows at a guaranteed rate. Term is significantly cheaper for the same death benefit amount, which is why many financial planners recommend buying term and investing the premium difference in tax-advantaged accounts. Consult an advisor to assess your needs.

This strategy often produces higher net wealth for people who actually invest the premium difference consistently and have access to adequate tax-advantaged savings vehicles. However, whole life can be appropriate for high-net-worth individuals who have maxed out other accounts, those with permanent estate planning needs, or people with health conditions that make future insurability uncertain. The right choice depends on your financial goals and discipline.

A portion of each whole life premium builds cash value in a tax-deferred account at a guaranteed growth rate, typically 2% to 4%. You can borrow against the cash value or surrender the policy for its cash value minus any surrender charges. Policy loans are not taxable but reduce the death benefit if not repaid. Dividends from participating policies can accelerate growth. Cash value is not included in the death benefit paid to beneficiaries.

When a term policy expires, coverage ends and no benefit is paid. You can renew many term policies at a higher premium based on your current age and health, or convert to a permanent policy if a conversion rider was included. If you no longer have dependents or significant financial obligations, you may not need to replace expiring coverage at all. Reassess your life insurance needs as your financial situation evolves.