Compare term and whole life insurance costs. See the buy term, invest the difference math.
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Buy term & invest difference: Investment value = (Whole premium - Term premium) × [(1+r)^n - 1] / r. Compare this to whole life cash value. Net advantage = investment growth - whole life cash value.
For most people: term life wins. A $500K 20-year term policy costs $25-35/month. Same coverage as whole life costs $300-400/month. Invest the $265-375/month difference.
Buy cheap term for pure death benefit. Invest premium savings in index funds. In 20 years, your investment portfolio exceeds the whole life cash value by 2-5x.
High-net-worth estate planning (estate tax mitigation), permanent life insurance need (special needs child), or business succession planning. Not for income replacement.
Cash value grows tax-deferred, earnable 4-6% guaranteed rate. You can borrow against it or surrender. Death benefit = face amount (insurer keeps cash value). That's the catch.
For term life: 10-15x annual income. DIME method: Debt + Income (years remaining) + Mortgage + Education. A 35-year-old earning $100K needs $1M-$1.5M in coverage.
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.