Term vs Permanent Life Insurance Calculator

The argument between term and permanent life insurance usually gets conducted with slogans. The arithmetic underneath it is simple: a permanent policy costs more each year, and the question is whether the value it accumulates beats what the difference would have earned invested.

This calculator runs that comparison over the period you choose. It answers one narrow question honestly rather than pretending to settle the whole debate.

Result

Better on this measure

Term plus investing the difference

Difference

$52,598

Annual premium difference: $4,280
Total difference paid: $85,600
Value if invested: $148,598
Illustrated cash value: $96,000
Total term premiums: $12,400
Total permanent premiums: $98,000

This is an estimate based on the values you entered. Actual premiums, coverage, eligibility and pricing vary by provider and by individual circumstances.

This compares two things only: premiums paid and the value that accumulates. It does not model the tax treatment, guarantees, surrender charges or the lifetime coverage that permanent policies provide.

The invested value assumes the difference is actually invested every year at the return you entered, with no fees and no missed contributions.

This is not financial advice. A licensed adviser can weigh the features this arithmetic ignores.

How to use the term vs permanent life insurance calculator

Enter the annual premium quoted for the term policy.
Enter the annual premium quoted for the permanent policy at the same face amount.
Set the comparison period and a realistic after-fee investment return.
Enter the cash value the permanent policy illustrates at the end of that period.

What people use this for

Evaluating a permanent policy illustration against the alternative.
Testing how sensitive the comparison is to the investment return assumed.
Understanding what the premium difference actually is in cash terms.
Preparing questions before a meeting with an adviser.

Worked examples

Every figure below is produced by running this calculator against the example inputs, so the numbers always match the tool.

Twenty-year comparison

$620 a year for term against $4,900 a year for permanent, over 20 years at a 5% return, with an illustrated cash value of $96,000.

Better on this measure: Term plus investing the difference
Value if invested: $148,598
Illustrated cash value: $96,000

A lower assumed return

The same policies with a 3% return instead of 5%.

Difference: $22,455
Value if invested: $118,455

What this comparison deliberately ignores

Two things only are compared: premiums paid, and value accumulated. Not compared are the tax treatment of cash value, guarantees within the policy, surrender charges in the early years, the lifetime nature of permanent cover, or estate planning uses that have nothing to do with return.

Those are real considerations. For households whose need for cover genuinely ends when the mortgage is paid and the children are independent, they usually do not outweigh the cost difference. For estate planning at scale, they can.

The assumption that decides the answer

The comparison assumes the premium difference is actually invested, every year, at the stated return, with no fees and no missed contributions. In practice most people who buy term do not invest the difference - it gets absorbed by ordinary spending.

That is the strongest honest argument for permanent cover: it is a forced savings mechanism. Whether that is worth its cost depends on whether you would otherwise save the difference, which is a question about you rather than about the policies.

Methodology and assumptions

What this calculator does, and what it deliberately does not do.

The premium difference is invested at the end of each year and compounds at the return you entered. No fees or taxes are deducted.
The cash value is the figure you enter from the illustration; illustrated values are projections and are frequently not guaranteed.
Death benefit differences, guarantees, surrender charges and tax treatment are not modelled.
All figures are estimates produced from the values you enter. This site has no rate feed and no carrier data, so it cannot quote or price a policy.
Nothing you type is transmitted or stored - the calculation runs entirely inside your browser.

This calculator provides an estimate based on the information you enter. Actual insurance premiums, coverage, eligibility and pricing vary by provider and individual circumstances.

This website is not an insurance company, an insurance agency or a licensed broker. It does not sell insurance, does not provide insurance quotes, and is not authorised to give advice about which policy you should buy.

No result produced here is an offer of insurance or a guarantee of coverage. Only a licensed insurer or agent, working from your verified details, can quote or bind a policy.

Frequently asked questions

What is cash value?

The accumulated savings component of a permanent policy, which you can borrow against or surrender the policy to receive. It is not additional to the death benefit on most policies.

Are illustrated cash values guaranteed?

Usually only partly. Illustrations typically show a guaranteed column and a non-guaranteed column - use the guaranteed one for a conservative comparison.

Is term always the cheaper option?

Per dollar of death benefit, in the years it is in force, essentially always. What it does not provide is cover after the term ends.

Is this financial advice?

No. It is arithmetic on figures you supplied, and it ignores several factors that matter. A licensed adviser can weigh what this cannot.

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