Is term or whole life insurance cheaper?

Term, by a wide margin. For the same $500,000, a healthy 30-year-old man pays $29.32 a month for 20-year term and $472 for whole life, 16.1 times more. At 40 it is $42.94 against $706, and at $1,000,000 it is $48.89 against $920. The cost per $1,000 of coverage per year is $0.70 for term and $11.33 for whole life.

What is buy term and invest the difference?

Buy the $29.32 term policy and invest the $442.68 a month you save against the whole life premium. At 7 percent a year it becomes $230,604 in 20 years and $540,057 in 30 years. At 5 percent it becomes $181,956 in 20 years. The whole life policy's cash value after 20 years is typically far less.

When is whole life insurance worth it?

When the need does not end: a parent of a child with a lifelong disability, an estate that owes tax and needs liquidity at death, or a business that needs to fund a partner buyout whenever a partner dies. For a family whose need ends when the children grow and the mortgage is paid, term is the default.

How long does whole life cash value take to build?

The surrender value in the first three years is typically zero or close to it, and the cash value first equals the premiums paid only around year 13 for a 30-year-old, because the first years' premiums pay the agent's commission, which runs 90 to 115 percent of the first year's premium, and surrender charges run 10 to 15 years.

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The protection ledger · Table No. 46

Term vs Whole Life Insurance

The same $500,000 for the same healthy 30-year-old costs $29.32 a month as 20-year term and $472 as whole life, 16.1 times more, for the identical promise. This article prices both, grades the investment account, and states when whole life is the right answer.

Filed November 3, 2026 · figures checked against 2026 sources

The same $500,000, two prices

The same healthy 30-year-old man, the same $500,000 of coverage, the same promise to pay his family if he dies. The 20-year term policy costs $29.32 a month. The whole life policy costs $472 a month. That is 16.1 times more, for the identical promise, and the gap is the whole story of this page, because the two policies do the same thing on the day that matters, and one of them charges sixteen times as much for it. At 40, the term is $42.94 a month and the whole life is $706, which is 16.4 times. At $1,000,000 of coverage, the term is $48.89 a month and the whole life is $920, which is 18.8 times. The cost per $1,000 of coverage per year is $0.70 for the term and $11.33 for the whole life, which is the cleanest way to state the difference: the term buys $1,000 of protection for 70 cents a year, and the whole life buys the same $1,000 for $11.33, and the $10.63 of difference is the price of the investment account that comes attached to the whole life policy, and the investment account is the part that needs grading, because it is sold as the reason to pay sixteen times more, and it performs like a bond.

The prices are from the Policygenius Life Insurance Price Index, tables retrieved in October 2026, for a healthy non-smoking man, and they are the published rates, not quotes, which means your own price will differ by your health, your age, and the insurer, but the ratio will not differ much, because the ratio is set by the structure of the products, not by the underwriting: term insurance is pure protection, and whole life is protection plus a savings account, and the savings account is expensive, because the insurer charges for managing it, and the charges are front-loaded, which is why the surrender value in the first three years is typically zero or close to it, and why the cash value first equals the premiums you have paid only around year 13 for a 30-year-old, year 15 at 40, and year 17 at 50. The surrender charges run 10 to 15 years, which means the money is locked up for a decade, and the family that buys whole life for the investment is buying an account it cannot touch for ten years, that returns 2 to 4.5 percent a year over a 20-year hold in the published rate-of-return analyses, which is a bond-like return, reached only after a decade of negative ones.

Buy the term, invest the difference

The difference is $442.68 a month, which is $472 minus $29.32, and the question is what that difference becomes if it is invested instead of handed to the insurer. At 7 percent a year, $442.68 a month becomes $230,604 in 20 years, and $540,057 in 30 years. At a more cautious 5 percent, it becomes $181,956 in 20 years and $368,424 in 30. Those are the figures for the $500,000 example, computed at the stated rates, and they are the comparison that matters, because the whole life policy's cash value after 20 years is typically far less than $230,604, and the term policy's $29.32 a month leaves the $442.68 free to be invested in an account the family controls, with no surrender charges, no front-loaded fees, and no decade of negative returns. The strategy has a name, buy term and invest the difference, and it is the standard advice of the personal finance literature for exactly this reason: the term policy is the protection, and the investment account is the investment, and combining them into one product makes both worse, because the protection costs sixteen times more and the investment returns bond-like yields after a decade of fees.

The arithmetic on this site's defaults makes the same point at a larger scale. A healthy 35-year-old man buying $1,050,000 of 20-year term pays about $76 a month, and the whole-life price for the same cover runs about $1,210 a month, which is 16 times the term price, and the difference is $1,134 a month, which invested at 7 percent for 20 years becomes $590,731. The family that buys the term and invests the difference has $1,050,000 of protection while the term runs, and $590,731 of investments at the end of it, and the family that buys the whole life has $1,050,000 of protection that never expires, and a cash value that is typically far less than $590,731, and the difference is the cost of the permanence, which is real, but which is priced at sixteen times the term, and which is the reason the term is the default choice for a family buying protection, not an investment. The whole life policy's permanence is its only advantage, and it is an advantage that matters only if the family needs coverage after the term ends, which most families do not, because the children are grown and the mortgage is paid, and the need is gone.

What whole life actually is

Whole life is a permanent policy, which means it pays whenever you die, at 40 or at 90, and it builds cash value, which is a savings account inside the policy that grows at a rate the insurer sets, and which you can borrow against or withdraw from, though borrowing reduces the death benefit, and withdrawing can trigger taxes, and surrendering the policy in the early years returns little or nothing, because the surrender charges run 10 to 15 years. The dividend interest rates at the big mutual insurers in 2026 are 5.75 to 6.60 percent, at Northwestern Mutual, Guardian, New York Life, and MassMutual, which sounds generous, until you learn that the dividend is paid on the cash value, not on the premiums, and the cash value is small in the early years, because the first years' premiums pay the agent's commission, which runs 90 to 115 percent of the first year's premium, with renewals of 2 to 5 percent, which is why the surrender value is zero in years one to three, and why the cash value first equals the premiums paid only around year 13. The product is not a scam, and it is not worthless: it is a permanent policy with a savings account, sold at a price that reflects the permanence and the account, and the price is sixteen times the term.

The term policy is the opposite: pure protection, no cash value, no investment, no permanence, and a price that reflects exactly that. A 20-year term policy for $500,000 costs $29.32 a month for a healthy 30-year-old man, and it pays $500,000 if he dies in the next twenty years, and nothing if he outlives it, which is the point, because the twenty years are the years his children depend on him, and after that the need is gone, and the money he did not spend on whole life is $230,604 in his investment account. The term policy is the right product for the family whose need is temporary, which is most families, because the need is the children and the mortgage, and both end, and the term ends with them. The whole life policy is the right product for the family whose need is permanent, which is a smaller set, and which is the next section.

When whole life is the right answer

Whole life is the right answer when the need does not end. A parent of a child with a lifelong disability needs coverage that pays whenever the parent dies, at 50 or at 90, because the child will always need support, and a term policy that ends at 65 leaves the child unprotected for the years after. An estate that owes tax needs liquidity at death, whenever death comes, and a permanent policy pays the tax without forcing a sale of the business or the property, which is the use the estate planners cite, and which matters only for estates large enough to owe tax. A business with partners needs a policy that pays on the death of any partner, whenever it happens, to fund the buyout, and a term policy that expires before the partner dies leaves the buyout unfunded. Those are the cases, and they are specific, and they are the minority, and the family that buys whole life for any other reason is paying sixteen times the term price for a savings account that returns 2 to 4.5 percent, which is the return of a bond, bought at the price of a stock.

The ladder of terms is the alternative for the family whose need shrinks over time, which is most families, because the mortgage falls and the children grow, and the need falls with them. A 30-year term for $1,000,000, a 20-year term for $500,000, and a 10-year term for $250,000, bought together, cost less than a single 30-year term for $1,750,000, because the shorter terms are cheaper, and the coverage steps down as the need steps down, which is the laddering strategy the planners recommend, and which is the reason the term market offers 10, 15, 20, and 30-year terms, so the family can match the length to the obligation. The calculator on this site suggests a term from the youngest child's age, rounded up to the standard lengths, and the suggestion is the starting point for the ladder, not the answer, because the mortgage may outlast the children, and the term should cover whichever lasts longer.

The new insight

The whole life policy is not expensive because it is a bad product. It is expensive because it is two products, and the second one is priced like a luxury. The protection costs $29.32 a month, and the savings account costs $442.68 a month, and the savings account returns 2 to 4.5 percent a year over 20 years, which is the return of a bond, bought at the price of a stock, and locked up for a decade by surrender charges. The family that buys the term and invests the difference has $1,050,000 of protection while the term runs, and $590,731 of investments at the end of it on this site's defaults, and the family that buys the whole life has $1,050,000 of protection that never expires, and a cash value that is typically far less than $590,731, and the difference is the cost of the permanence, which is real, but which is priced at sixteen times the term. Buy the protection for the years you need it, and buy the investment separately, because the combined product makes both worse, and the separate products make both better.

How to choose, in practice

The practical way to choose is to price the need first, with the calculator on this site, and then to price the term, because the term is the default for a family whose need ends, and the whole life is the exception for a family whose need does not. The need on the defaults is $1,050,000, and the term price is about $76 a month for a healthy 35-year-old man, and the whole-life price is about $1,210 a month, and the difference is $1,134 a month, which is the amount to invest if you buy the term, and the amount to pay the insurer if you buy the whole life, and the choice is between $590,731 in your own account in 20 years and a cash value that is typically far less, and the permanence that the whole life buys. The household that needs permanence, for a disabled child, an estate, or a business, should buy the whole life, and the household that does not should buy the term, and the household that is unsure should buy the term, because the term is the cheaper mistake: a term policy that turns out to be too short can be replaced, and a whole life policy that turns out to be unnecessary has cost sixteen times the term price for the years it ran.

Sources

Policygenius Life Insurance Price Index, tables retrieved October 2026: healthy non-smoking man, 20-year term vs whole life, $500,000 at 30: $29.32 vs $472 a month, 16.1 times; at 40: $42.94 vs $706, 16.4 times; $1,000,000 at 30: $48.89 vs $920, 18.8 times; cost per $1,000 of coverage per year: term $0.70, whole life $11.33. Buy-term-and-invest-the-difference: $442.68 a month at 7 percent a year becomes $230,604 in 20 years and $540,057 in 30 years; at 5 percent, $181,956 in 20 years and $368,424 in 30. Cash value: surrender value typically zero or close to it in years 1 to 3; cash value first equals premiums paid around year 13 for a 30-year-old, year 15 at 40, year 17 at 50; surrender charges run 10 to 15 years; published rate-of-return analyses of cash value policies land around 2 to 4.5 percent over 20-year holds. Dividends 2026: Northwestern Mutual 5.75 percent, Guardian 6.25 percent, New York Life 6.40 percent, MassMutual 6.60 percent. Commissions: permanent policies run 90 to 115 percent of the first year's premium, with renewals of 2 to 5 percent. LIMRA and Life Happens, 2026 Insurance Barometer Study: 92 million U.S. adults need life insurance or more coverage; 52 percent own at least one policy. All calculator figures were computed by this site's calculator under the stated model.