Life insurance comparison guide
Test buy-term-and-invest-the-difference against a policy illustration
Term and whole life solve the same protection need in different ways. Term provides coverage for a stated period; whole life is designed for lifetime coverage and builds cash value.
A fair comparison uses equal death benefits, the real premium schedule, policy-specific guaranteed and non-guaranteed values, and an investment return after fees and taxes.
How to use this tool
Match the death benefit
Start with comparable coverage amounts so price differences do not reflect different protection.
Copy the illustration
Use cash values from the exact policy year and distinguish guaranteed from current illustrated values.
Model realistic investment drag
Subtract fund expenses and any expected annual tax drag from the gross return scenario.
Test death timing
Move the death year before and after the term expiration to see when coverage changes the result.
Guaranteed and illustrated values are different
Whole-life guarantees are contractual when required premiums are paid. Dividends, credited rates, and non-guaranteed illustration columns can change. Compare the investment account with both figures rather than treating the current illustration as certain.
What the model includes
- Monthly investing of the positive premium difference
- Term expiration and limited-pay whole-life schedules
- Investment expenses and estimated tax drag
- Living-value comparison at a common horizon
- Death benefit plus investment balance in a chosen year
Questions to ask before replacing coverage
New underwriting may change the price or eligibility. A replacement can restart surrender-charge periods, contestability provisions, and acquisition expenses. Never cancel existing coverage until replacement coverage is active and reviewed.
Life insurance contracts, taxes, surrender charges, loans, dividends, underwriting, and estate needs vary. This tool compares entered cash flows and is not insurance, tax, legal, or investment advice. Do not replace coverage based only on this estimate.
Sources and further reading
Frequently asked questions
What does buy term and invest the difference mean?
It means purchasing lower-cost term insurance for the protection need and regularly investing the premium difference instead of using a cash-value policy.
Is whole-life cash value paid on top of the death benefit?
Usually the insurer retains cash value and pays the stated death benefit, though policy riders and structures differ. This calculator does not add cash value to the whole-life death benefit unless you enter a larger benefit that reflects the contract.
What investment return should I use?
Use multiple scenarios after fund expenses and taxes. The required-return result shows the gross return needed to equal the entered illustrated cash value; it is not a forecast.
Can this calculator evaluate an IUL or variable life policy?
It can compare entered values, but it does not model caps, participation rates, cost-of-insurance changes, loans, lapse risk, or subaccount charges. Use the carrier’s guaranteed and non-guaranteed ledgers and review them with a qualified professional.