Term vs. Whole Life: The Numbers
I want insurance to protect- and investments to build wealth.
What This Means
Is term life insurance or whole life insurance better?
Term and whole life insurance can both protect your family if something happens to you. But they work very differently.
Term life insurance gives you coverage for a specific period of time. Whole life is designed to last your entire life and also builds cash value.
For most people, I strongly prefer term.
I want life insurance to do one job — protect the people who depend on you financially if something happens to you.
I recently ran the numbers for a client’s 27-year-old son who owns a growing business. He absolutely needs life insurance, so we compared $1 million of term coverage with $1 million of whole life.
For a healthy 27-year-old male, a 35-year term policy was $59 per month. The whole life policy was $788 per month.
Same $1 million of coverage to start.
$729 per month difference.
Now take that $729 and invest it every month for 35 years.
If he averaged a hypothetical 10% annual return, he’d have roughly $2.8 million at age 62.
Yes, his term policy would be over.
But that’s okay. Look what he built.
He now has $2.8 million of his own money. The goal was never for him to need life insurance forever. The goal was for him to eventually become self-insured.
Now compare that with the actual whole life illustration we reviewed.
At age 62, it showed about $824,000 of cash value and a $1.95 million death benefit.
And remember — those are illustrated values. They’re not guaranteed. They’re based partly on future expected dividends that can change.
Buy enough term insurance to protect your family. Invest the difference. Build wealth.
And hopefully, by the time the term insurance runs out, you’ve built enough wealth that you don’t need life insurance anymore.
I want insurance to insure me. And I want my investments to build my wealth.
Common Questions
What happens when term life insurance expires?
When the term ends, the coverage ends unless you renew, convert, or purchase another policy. My goal is to use term insurance to protect your family while you’re building wealth — and hopefully reach a point where you no longer need life insurance.
What does it mean to become self-insured?
Being self-insured means you’ve built enough wealth that your family no longer needs a large life insurance payout if they lose your income. Your assets can provide an income stream to help replace the income your family depended on.
What rate of return does whole life insurance cash value earn?
It depends on the policy. But one thing that’s important to understand is that the dividend rate you see advertised is not the return you’re earning on your cash value. If an insurance company has a 6% dividend rate, that doesn’t mean your money earned 6%. Look at the actual cash value compared to what you’ve paid into the policy—that tells you a lot more.
If I die, will my family receive both the cash value and the death benefit?
No. And that’s often overlooked. Insurance companies do not pay out both.
Remember This:
The goal isn’t to need life insurance forever. The goal is to build enough wealth that someday you don’t need it.
Keep Learning:
Protect First. Build Second Life insurance has one job: protect the people who depend on you. See why I prefer term insurance to protect your family while you focus on building wealth.
Retirement Income Strategy: Building wealth is only part of the goal. See how your investments can eventually create an income stream in retirement—helping replace the income you once depended on from work.