Why Buy Term and Invest the Difference Might be a Mismatch

What Is the Real Purpose of Buy Term and Invest the Difference?

The whole idea behind buy term and invest the difference is invest some money and build this money up so you have access to it.



Well, now with the IUL, you have access to it immediately with a chronic illness writer through your death benefit.

How Does an IUL Let You Access Your Death Benefit While Alive?

So if you have a chronic illness, you can pull out up to 80% of your death benefit before you die.

So that means that now with the IUL strategy, you don't have to pay the additional money to invest a difference.



You can literally buy the policy at minimum premium, and you can keep the policy enforced just by paying the minimum cost of insurance all the way through the rest of your life, and you still have access to 80% of your death benefit before you die.

Why Doesn’t a Chronic Illness Rider Actually Work on Term Insurance?

So the buy term and invest the difference companies that go, well, we'll fix that. We'll just allow it to be put on our policy.

Well, it's not going to fix it. It's a mismatch because your policy is going to end before the person probably ends up using it.

Because you don't use chronic and critical illness probably until the last, I'd say three to five years of your life, maybe in the last 10 years.

But usually it's three to five years before you die. You'd have a chronic illness and you'd use that death benefit. That's the purpose.

But now the term policy ends.



So you put a chronic and critical illness writer on the term policy, it ends before they would use it. What's the point? It's a total mismatch.

Why Is Term Insurance Exposed as the Weak Link?

Why not just put the rider on term policy?

The problem you're going to have with the term policy is putting a chronic illness rider on it is really a mismatch because the term policy ends by design before you die.

The problem with the term is now all of a sudden it really becomes exposed that you, now that you can access your death benefit with this new chronic and critical illness rider on the IUL, it really exposes the problem of the term in that you can't do that.

So now the term ends and you don't have the death benefit, but now you can access the death benefit on the IUL.



So it really put a dilemma with the term.

Do Any Term Policies Actually Solve This Problem?

So what they did is some companies allow you to put a chronic illness writer on a term policy.

Not all of them, just some of them. And there is at least one I know of that makes it automatic.

So you can buy a term policy with a chronic illness writer.

If your problem is having an access to death benefit, an IUL policy with this chronic and critical illness rider just wins over by term and invests a difference. Is that right?

Why Does an IUL Ultimately Win Over Buy Term and Invest the Difference?

It would win over it because the reason it does is the chronic and critical illness rider on the IUL never ends.

So the IUL goes all the way to 120.

Even the term policies that allow you to put the chronic and critical illness on them, the policy ends.

So the policy is going to end before the person dies.

So therefore, there's not going to be any life insurance. There's not going to be any policy to have the chronic and critical illness writer pull money out of.

So the problem you're going to have with the term policy is putting a chronic illness writer on it is really a mismatch because the term policy ends by design before you die.

And the whole philosophy behind it was invest the difference and I can self-insure myself. With this investment, I don't need the death benefit.



Well, now that you can put the chronic illness rider on the IUL, it just solved that problem because now you can access the death benefit on the IUL.

Conclusion

The buy term and invest the difference strategy depends on investing money so you can access it later.

The IUL with a chronic and critical illness rider removes that need entirely by allowing access to the death benefit itself up to 80% while the policy is still in force.

Because the IUL does not expire and term insurance does, the rider works as intended on the IUL and fails by design on term policies.

That structural difference is why the IUL strategy fundamentally outperforms, and effectively eliminates the original buy term and invest the difference approach.