The hidden cost of level term insurance

I'm sure you've heard that you should "Buy term and invest the difference."  Another phrase I've heard is that I want to buy my insurance as insurance, as if whole life insurance is something else.

There are many reasons given in favor of term insurance.
1. Lower commissions
2. It's cheaper
3. It keeps my savings/investing separate from my purchase of insurance.
4. I don't need insurance for my entire life.

Let's look at these reasons and some of the hidden costs of choosing term insurance.

Commissions.  No one wants to pay more than they should for something, but people pay commissions every day.  Whole life insurance commissions are generally higher than term life commissions, but there are ways to reduce them.  This reason is not entirely invalid, but it is a bit of a smokescreen if the other reasons to purchase whole life insurance are good ones.

Cheaper.  This is deceptive.  It is cheaper, but it's not the same product.  It's like saying I'm purchasing a Kia instead of a Mercedes and then pretending as if you got the same thing.  Cheaper is not always better.

Keeping savings separate from insurance.  Buying term definitely does this, but it's not obvious what the advantage is.  What if there is an advantage to combining the two?

I don't need insurance for my entire life.  Really?  And you know that how?  No one knows what will happen?  That's why there is insurance.  The argument usually is that investments will grow so great that I won't need insurance once I reach age XX.  You fill in the XX.  The problem is that there are no guarantees, which brings us to the hidden costs of term insurance.

Hidden cost #1 - what if your investments don't attain the value you assumed?  So, you reach age 60 and you can't retire or your investments are worth 20% less than you had projected.  What then?  You die at age 61 with no insurance.  Your spouse has to sell the house, get a higher paying job, or ...?  This is not impossible.  Look at the past fifteen years of the stock market.  And are you willing to bet, which is what you are doing, that the next fifteen to twenty years of the stock market will be like the past twenty or the twenty before that?

Hidden cost #2 - what if you can't get insured again once your current term policy runs out?  Here is an example.  You are 25 years old and you and your spouse have just bought a house and had a child.  You need live insurance, so you are really smart and you lock in a 30 year term policy.  You think you'll need insurance until age 65.  When do you purchase your overlapping policy?  Do you wait till age 55?  What will the premiums be then?  What if you develop a heart condition or cancer or any other disease that would either cause you to be uninsurable or to have extremely high rates?  Do you really want to risk not being able to be insured from age 55 until age 65 when you are much more likely to die?

Hidden cost #3 - you will almost certainly not receive anything from your term insurance policy.  This is simply a fact.  If it were not, then how could insurance companies sell term insurance so inexpensively?

In many cases, especially for young people, the answer is probably a mix of investments and savings options that includes stock market based investing, a whole life insurance policy that will last forever and a term life policy to provide bonus protection and an inexpensive rate for those years when spouse and kids are relying heavily upon you.