I am starting to think that term life insurance is a waste of money. When you consider that only 2% of term policies ever pay out, it seems to be true.

ROP term can be an alternative but often one can get a better return on the additional premiums on his own so you're subject to opportunity costs as well as insurance costs.

Universal and indexed universal seem to be good alternatives but then again they cost more.

Any opinions ?

I believe Term is the way to go. The rates of return you'll get by investing in whole life policies are historically very low. So you're better off with a term policy and investing the extra money on your own. Life insurance should only be purchased for a safety net if you die - not as an investment vehicle. Here's a great article on it:
http://biz.yahoo.com/pfg/e41insurance/art011.html

I understand the whole buy term and invest thing and I'm not talking about using permanent insurance as an investment. Although sometimes it is the only option for people. For example my wife and I probably won't be able to contribute to a Roth in the next couple years because we're over the income limit. So where can we put some money to grow tax deferred and use tax free? Nowhere but a life insurance product.

It seems like you don't think people need insurance after retirement. I have to disagree. Even if out of debt and with a comfortable retirement nest egg, life insurance is still needed. It can allow you to live on more money from your retirement nest egg and not by using any cash values. You can feel free to live on more of your money when both of you are living because when one dies the insurance will make sure the surviving spouse has enough to live on.

And returns in a life product can be much better than whole life pays. The indexed universals are have caps of 11-17% and generally pay a little less than the S&P because dividends are not included.

So if you think of life insurance in these terms, wouldn't it be best to buy some permanent insurance when you're young?

Different strokes for different folks. There is no financial advice that suits all people. You've done your homework and analzyed all the other options. Since you want life insurance in later life, then term wouldn't be good for you. I don't know enough about Indexed Universals to speak intelligently about it. I've always been a believer, especially when you're young, to invest money on your own and not through life products. My returns in the market over time have been good overall so I personally, wouldn't buy a life product, but that's just me.

I take my money very seriuously. And I have MFs, Variable Annuities and ETFs now. I don't want to necessarily put my money into permanent life and definitely not variable life, but I'm thinking bang for the buck in the long term.

Brian was asking about the same thing here
Life Insurance with Savings?

It depends what you want to do with your cash but I'd have reservations about using a vehicle not ideally suited for savings. In my opinion there are better savings vehicles out there and even if Term Insurance may seem like money wasted the actual amount isn't that great. Compare your Term payments with a savings payments and you may find that when you use a savings plan for insurance by shifting the investment to that you could find the higher payments compared to the coverage makes Term more attractive. It really depands on your objectives and aims though. And welcome to the forums Skull Pilot.

I am not talking about using insurance as a savings vehicle. I am talking about the long term need for life insurance. If you need insurance after age 60, term gets very expensive.

Yes, the younger you are, the better to invest in term life insurance or in any other insurance. While you need it less, that is the time to start investing.

hey, thanks for those suggestions..i really am learning a lot from this forum.

Life insurance is never a waste of money at all becasue you are giving the insurance company a big liability and all in all everybody in this world will die so if you have a family,all you are doing is a favour to yourself and family.