If Buy Term, Invest the Rest is So Good, Why Isn’t Everyone Doing It?

The “Buy Term, Invest the Rest” (BTIR) strategy is often touted as a superior financial approach.

By purchasing term life insurance and investing the savings from the lower premiums, individuals can potentially achieve better financial outcomes compared to buying whole life insurance. However, despite its apparent benefits, BTIR is not universally adopted.

This article explores the reasons behind this and why many people still prefer investing through life insurance.

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Lack of Financial Literacy

Financial literacy is crucial for making informed decisions about insurance and investments. Unfortunately, many people lack the necessary knowledge to navigate these complex fields. Studies have shown that a significant portion of the population struggles with basic financial concepts, which can lead to poor decision-making1.

Without a solid understanding of investments, individuals may feel overwhelmed and opt for the seemingly simpler life insurance products that are being marketed by insurance agents.

Trust in Insurance Agents

Insurance agents often have a significant influence on consumer choices.

Whole life and investment-linked insurance products typically offer higher commissions than term policies, incentivising agents to promote them more aggressively. Many consumers trust their advisors, assuming they have their best interests at heart, which isn’t always the case.

This trust can lead to decisions that favour whole life or investment-linked insurance products over BTIR, even when the latter might be more financially beneficial.

Perceived Security of Investing Through Insurance Products

Some insurance products provide guaranteed cash value accumulation, offering a sense of security to policyholders. For risk-averse individuals, the idea of guaranteed returns is more appealing than the potentially higher, but uncertain, returns from investing their savings on their own.

This perceived security is a strong motivator for choosing whole life insurance over the BTIR approach.

Marketing and Misconceptions

Insurance companies offer a suite of products that are often marketed as a comprehensive solution for both insurance and investment needs. This can be misleading, as consumers might not fully understand that separating these needs through BTIR can often yield better financial results and give flexibility when our life circumstances change.

The powerful marketing tactics of insurance companies can create misconceptions, leading people to believe that whether insuring or investing, their insurance products are the best or only option.

Behavioural Factors and Investment Discipline

Investing requires discipline and consistency, which not everyone possesses.

The flexibility of BTIR can be a double-edged sword; instead of investing the savings from lower term insurance premiums, some might end up spending the money. Without the discipline to move a portion of your salary into your brokerage and then invest regularly and wisely, the financial benefits of BTIR are lost.

Many of my friends lack the necessary discipline. Despite educating them about the benefits of BTIR for more than a year, they have not taken action.

Complexity and Confusion

The products offered by financial institutions are inherently complex, and understanding the nuances to determine how you should invest your money is daunting. This complexity often results in inertia, where consumers stick with what seems easier or is recommended by an advisor.

The fear of making a wrong decision can paralyse people, leading them to choose to invest through insurance products simply because it appears less complicated.


While “Buy Term, Invest the Rest” is a sound financial strategy, it is not universally adopted due to various factors such as lack of financial literacy, trust in insurance agents, perceived security of whole life insurance, powerful marketing, behavioural tendencies, complexity of financial products, and specific needs for permanent coverage. Each individual’s situation, knowledge level, and risk tolerance play significant roles in their insurance and investment choices.

But if one is unable to implement a BTIR strategy due to some of the above factors, is he/she better off buying an insurance product to invest than to do nothing at all? What do you think? Leave your thoughts in the comments section below.

  1. Financial literacy and financial well-being: Evidence from the US ↩︎

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