"Buy term and invest the difference" is a financial strategy that involves purchasing term life insurance, which offers coverage for a set period of time, and investing the money that would otherwise be spent on premiums in other investment vehicles, such as mutual funds or stocks.
The idea behind this strategy is that term life insurance policies are generally less expensive than whole life insurance policies, which offer both coverage and investment components. By buying term life insurance and investing the difference in premiums, individuals can potentially earn higher returns on their investments and achieve better financial outcomes.
Whether this strategy is better than whole life insurance depends on an individual's unique circumstances and financial goals. Whole life insurance offers lifelong coverage and has a cash value component that can potentially grow over time. However, it is typically more expensive than term life insurance (5-15x more expensive in many cases).
Ultimately, the best choice between the two options depends on an individual's needs and financial situation. For example, if someone is looking for temporary coverage to provide for their dependents in case of their untimely death, term life insurance may be a better option. On the other hand, if someone is looking for lifelong coverage and the ability to build cash value over time, whole life insurance may be a more suitable choice. It is always a good idea to consult with a financial advisor or insurance professional to determine the best option for your particular situation. Feel free to reach out if you have any questions!
Samuel Shinn, MBA
Wealth Advisor
Samuel.shinn@lpl.com
856-437-9294