So you're going to pay $60/month for your million dollar policy. Over the life of the policy you have just spent $21,600 on the policy. You die on your 63rd birthday and have no insurance. Your family gets zero. Buy term and invest the rest isn't a good strategy unless you're planning on dying before the end of the term.
Actually
Buy term and invest the rest is a
great idea if you actually
invest.
Using some numbers from New York Life the premium on a $100,000 whole life policy is about $98 a month. Now, after 30 years you could cash out of that policy and receive approx. $75,000 or if you died at the same time your beneficiary would receive the face value of the policy, $100,000, and
not the cash value.
Now, a 30 year level term $100,000 policy has a premium of about $13 a month. a difference of $85. If I take that $85 and invest it into something that earns 8% minimum, at the end of that 30 year term I'll have about $128,000. If on the last day of your term you die, your beneficiary gets the payout of the policy and
keeps the savings.
Now, going back to our million dollar policy, yes, it does expire at the end of the term (although some policies are extendable), however if you've properly planned for the future and have a decent sized nest egg when your policy expires then you are now
self-insured. If you max out a Roth IRA ($417 a month) between ages 30 and 60 and can make 8% you will have $630,000 in the bank at age 60. If you can make 10% that number jumps to $958,000. If you've got that in a nest egg, who needs life insurance?