Term vs Whole Life Insurance Calculator Formula

Understand the math behind the term vs whole life insurance calculator. Each variable explained with a worked example.

Formulas Used

Monthly Savings (Buy Term)

premium_difference = monthly_savings

Total Term Premiums

total_term_cost = term_monthly * total_months

Total Whole Life Premiums

total_whole_cost = whole_monthly * total_months

Invested Savings Value

invested_value = invest_rate > 0 ? monthly_savings * (pow(1 + invest_rate, total_months) - 1) / invest_rate : monthly_savings * total_months

Variable	Description	Default
`term_monthly`	Term Life Monthly Premium(USD)	40
`whole_monthly`	Whole Life Monthly Premium(USD)	350
`term_years`	Policy Duration(years)	20
`invest_return`	Investment Return on Savings(%)	7
`monthly_savings`	Derived value`= whole_monthly - term_monthly`	calculated
`invest_rate`	Derived value`= invest_return / 12 / 100`	calculated
`total_months`	Derived value`= term_years * 12`	calculated

This strategy compares two approaches:

1. Whole life: Higher premiums that build cash value inside the policy 2. Term + invest: Lower premiums, invest the savings in the market

FV = Monthly Savings x [(1+r)^n - 1] / r

Where r is the monthly investment return and n is total months.

Whole life guarantees cash value; investments carry market risk

Whole life has tax advantages on cash value growth

Term life expires; whole life is permanent

$40/month term vs $350/month whole life over 20 years at 7% return.

term_monthly = 40whole_monthly = 350term_years = 20invest_return = 7

01Monthly savings = $350 - $40 = $310
02Total term premiums = $40 x 240 = $9,600
03Total whole life premiums = $350 x 240 = $84,000
04Invested at 7% for 20 years = $310 x [(1.00583)^240 - 1] / 0.00583 = ~$161,400

Ready to run the numbers?