Whole life, or term plus investing the difference?
Type in the premiums and cash values from your quotes and policy illustration, and see the return the extra whole life premium earned against investing it yourself. The numbers shown are an example, not a quote.
Compare at the end of yearMust be within the term. Your illustration shows the cash values for these years.
Term length, in years
WHAT THE EXTRA PREMIUM EARNED
1.3%
Example numbers, not a quote: by the end of year 20 the whole life policy costs $97,000 more in premiums than the term policy ($4,850 a year). Its cash surrender value is $112,000, which works out to 1.3% a year on that extra premium. Invested at 6% instead, the same $4,850 a year would be $189,115. The term policy covers you until the end of year 20; whole life keeps its death benefit after that, and this page does not put a price on it.
Extra premiums paid
$97,000
Cash surrender value
$112,000
If invested at 6%
$189,115
Invested minus cash value
+$77,115
UNDERSTAND YOUR RESULT
Terms:Term life insurance
Whole life cash value against the extra premium invested
Whole life cash surrender valueExtra premium invested at 6%
Year 10
$36k
$68k
Year 20
$112k
$189k
At the end of year 10 the cash surrender value is $36,000 and the extra $4,850 a year invested at 6% would be $67,762; at the end of year 20 the cash surrender value is $112,000 and the extra $4,850 a year invested at 6% would be $189,115.
What the extra premium earned, year by year
| End of year | Extra premiums paid | Cash surrender value | Invested at 6% | Yearly return on the extra premium |
|---|---|---|---|---|
| 10 | $48,500 | $36,000 | $67,762 | −5.5% |
| 20 | $97,000 | $112,000 | $189,115 | 1.3% |
| 30 (term ended) | — | $196,000 | — | — |
The yearly return is the rate the extra premiums would have to grow at to equal the cash surrender value. A negative number means the cash value is below the extra premiums put in. Years after the term ends are not compared, because the term policy no longer covers you.
What moves the needle
Each row re-runs the calculation with one change. Click to apply.How it's computed
FORMULA
Extra premium = whole life premium − term premium, per year
Extra premium after N years = extra × ((1 + r)^N − 1) ÷ r × (1 + r), with each payment at the start of a year
Yearly return on the extra premium = the r that makes that amount equal the cash surrender value at the end of year N
Invested instead = the same expression at the return you set
- Every dollar figure comes from you: the premiums from your quotes and the cash values from the policy illustration. The page estimates nothing about either policy, and the numbers it opens with are an example, not a quote.
- Both policies are assumed to pay the same death benefit. Premiums are paid at the start of each year and cash values are read at the end of the year. A death benefit that grows with dividends is not counted.
- Illustrations show a guaranteed column and a non-guaranteed (projected) column. Enter one set at a time to see both: the guaranteed column is what the insurer commits to, the projected column assumes today’s dividend scale continues.
- Only years the 20-year term is in force are compared. After that the term coverage is gone and whole life is not, so the two are no longer alike.
- Taxes: the return you enter for investing should be after fees and tax. If you surrender a whole life policy, the amount above the premiums you have paid is taxable income (IRS Publication 525); that is not taken out of the cash value here.
- Policy loans, riders, limited-pay policies, premiums that change and your future health are not modelled.
WORKED EXAMPLE · SAMPLE NUMBERS
Extra premium: $5,200 − $350 = $4,850 a year. Over 20 years that is $4,850 × 20 = $97,000 paid in. The cash surrender value at the end of year 20 is $112,000, so the extra premium grew from $97,000 paid to $112,000: 1.35% a year. Invested at 6% instead: $4,850 × ((1 + 6%)^20 − 1) ÷ 6% × (1 + 6%) = $189,115.
SOURCES
[1]Publication 525, Taxable and Nontaxable Income: Life Insurance Proceeds (surrender of a policy for cash)Internal Revenue Service[2]26 U.S. Code § 72: Annuities; certain proceeds of endowment and life insurance contractsLegal Information Institute, Cornell Law School[3]Life insurance & disability insurance proceedsInternal Revenue ServiceHSBuilt by Hussain Sehorewala · checked against worked examples · Sep 29, 2026
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Questions about this result
You buy a term policy, which usually costs much less for the same death benefit, and invest the difference in premium yourself. This page turns that into two numbers you can check against your own illustration: the yearly return the extra whole life premium earned as cash value, and what the same money would be worth invested at a return you choose.
The level yearly premium, and the cash surrender value (not the death benefit and not the account value) at the end of year 10, 20 and 30. Enter the guaranteed column first, then the projected column, and compare. The term premium comes from a term quote for the same death benefit and length.
In the example on this page the cash surrender value at year 10 is $36,000, which is $12,500 less than the $48,500 of extra premiums paid, a return of about −5.5% a year. Whole life cash values often start below the premiums paid, which is why giving up a policy early can cost money. Check your own illustration.
It is the yearly rate the extra premium would have to earn elsewhere to end up with the same money as the cash surrender value. In the example, about 1.35% a year at year 20. Investing carries risk and the guaranteed column does not, so a higher assumed return is not a promise; that is why the page shows both.
The death benefit after the term ends, taxes if you surrender the policy (the amount above the premiums you paid is taxable income), loans, dividends’ effect on the death benefit, riders, limited-pay policies and any change in your health. If your health changes you may not be able to buy new coverage when a term policy ends.
This page does not say. It compares two sets of numbers. Whether you need coverage for your whole life, for an estate, for a dependent who will always need support or for a business is a separate question, and one to take to a licensed fee-only planner or a fiduciary before you buy.