I roll my eyes every time I hear the phrase, “Buy term and invest the difference.” This strategy relies on two assumptions. The first assumption is that people are disciplined enough to invest the difference. The second assumption is a belief that investments will be profitable. Term life insurance is best for temporary needs such as mortgage protection and income replacement. Whole life, on the other hand, is best for funding a cremation or burial. In fact, small whole life policies are often referred to as burial insurance or final expense insurance.
Many people lose their term life policies because they experienced a financial hardship and couldn’t pay the premiums. Term life offers very little to prevent a nonpayment cancellation other than a 30 day grace period and a chance to reinstate. Whole life has automatic premium loans to pay premiums when you can’t. Premium loans are made possible by a policy’s cash value. Whole life has cash value and term life doesn’t.