I think you are both right to some extent. I would like to hear TaxGuru's point of view, though. I am sure he has some good points to add to this discussion thread.

As far as I am concerned, I know that if you are in business, there are situations that if you apply for a large loan, or finance an aquistion, that the Note holder would be requesting a Life Insurance collateral. This is usually Term Insurance.

So, in this case, taking a low cost term insurance is the right answer.

I initially bought Term insurance as a means of mortgage protection. . This in my opinion is the single most important reason for purchasing the Term Insurance.