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In the mid 20th century, a number of life insurance companies used some aggressive sales tactics to persuade people to buy Term Life. Term Life is, without question, the cheapest life insurance you can buy. That's because you are paying only the cost of insurance plus annual fees. Your insurance premium is based on the cost of insuring you today.

The company is betting that you won't die within the time period, so even though the entire face value is at risk (at least for the first few years), the entire premium will ultimately be profit for them. At the end of the term, you will either cancel the insurance, or convert it to some other form of term insurance, either annually renewable, or decreasing term. Thus, in 20 years, your new premium will be based on your age at that time, and will go up sharply. Furthermore, while some companies offer the option of converting a Term to Whole Life, most limit your choices to simply another type of Term. The odds are all on their side.

Why did they do this?
The rationale used to get people to buy cheap Term insurance was to "buy Term and invest the difference." In the mid to late 20th century, the stock market was booming, interest on savings was as high as 11 to 14% in some places, and various mutual funds appeared to have no ceiling. Thus, agents reasoned (under instruction from their companies), instead of spending all that money on Whole Life in hopes of having a cash value that could be used later as an investment, a client could buy the cheapest insurance possible, protect home and family for 20 years, and simultaneously invest the money that would have been spent on more expensive life insurance. By the time the life insurance expired, the investment, at compounded interest, would be enormous, giving a person both a retirement fund and enough money for final expenses.

Why didn't it work?
The logic of the Term soliciting made sense. The problem was, very few people ever invested the difference. Some companies preyed on low income families who had no clue about investing while others simply left it up to the client to figure out what the "difference" actually was and where to invest it. If a company had nothing but Term to offer (which is all some had) they had no reliable way of comparing Term to Whole Life; who would know how much to "invest." Furthermore, many clients—feeling the financial crunch of raising large baby-boomer families—were concerned only about having life insurance in the event of an emergency. They trusted to retirement pensions for money in their senior years, and took advantage of cheap insurance to keep more money in their pockets. Knowing they should invest some of that money, many put off doing so, thinking they would have more money when the kids were through college, or when the house was paid off. It didn't work like that, of course, and today, an alarming percentage of people about to retire are discovering the Term insurance they took out 20 years ago is going to be impossible to maintain. Additionally, many who believed they had life insurance "on the job" are discovering that the employers control the policies—meaning a person's insurance can entirely disappear once they retire.
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