Question

Explain the concept of the buy-term and invest the difference (BTID) strategy regarding life insurance.

Answer 1

The buy-term and invest the difference (BTID) strategy refers to utilizing the capital that would cost to buy a permanent life insurance policy and comparing it to the cost of a term policy which would have the same face amount or death benefit for the term (time period for which the policy was required).

Advocates of buy-term and invest the difference (BTID) compare the return on a permanent life insurance premiums with the same amount invested at the market returns (Stocks, mutual funds, REIT's). Due to this, they ignore the cost of the term insurance. BTID provides a lower fee and better coverage than a whole life insurance product.