Buy term, invest the diff
Term vs. whole life insurance: the math that matters
Term life insurance is pure protection — pay a low premium for 10-30 years, then coverage ends. Whole life combines insurance with savings at 1-4% returns. The math almost always favours term plus investing: a $2M term policy might cost $100/month versus $1,500 for whole life, and the $1,400 monthly difference invested at 7% for 20 years grows to roughly $695,000.
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Try calculatorKey takeaways
04 · ideas- Term: pay for 10–30 years, coverage ends, cost is low
- Whole life: permanent coverage + cash value at 1–4% return
- $2M term might cost $100/month vs $1,500 for whole life
- $1,400/month invested at 7% for 20 years = $695,000
Term life insurance covers a specific period — 10, 20, or 30 years. If you die during that period, your beneficiaries receive the payout. If you don't, coverage ends and you paid for protection you didn't need (like car insurance — you hope you never use it).
Whole life insurance (also called permanent life) covers you forever. It also builds "cash value" over time — a savings component within the policy.
The core question: Is the investment component of whole life worth paying 10–15× more in premiums?
For most people: No. Buy term and invest the difference.