Term Life Versus Cash value Life Insurance

Ok so everyone else has explained the difference between the types of policies highlighted but there is the hybrid mentioned that was not discussed in detail. The best of both of these policies is the combination called Universal Life or Universal Variable Life. This policy combines the best of both term and whole life (cash value). The main important feature is that it is fairly inexpensive especially when you buy it when both young and healthy(before 30). It also has the benefits of providing an adjustable monthly premium so that you can vary them in times of hardship. For instance the base premium on $100k policy may be $50 a month but if you lose your job you can opt to adjust down the rate to $25 and still keep the policy in force providing protection and maintain the equity in the policy. While this is not recommended on a regular basis (since continuing lower payments would not be enough to keep the policy live long term) it is useful in times of trouble. The lowering of payments can be reversed and increased when you can put in more. If for some reason times REALLY get tough you can also lower the death benefit to keep the policy going. So reduce it to $50k and maintain it instead of losing everything you put into it. It offers the same protection as any other policy (paying your loved ones at death) as well as the possibility of increasing cash values.
The variable life version has mutual fund investment components that your excess premium is invested in and can grow so your money is working hard for you. In the above example a $50 monthly premium may be divided in this way…$15 towards insurance costs and then $5 for expenses and $25 to the investment fund.
The down side of the policy is that the insurance costs do increase annually just like annual renewable term (since you are getting older). In 20 years the costs of the policy monthly may be more than the $50 you are paying and the cash value would be used to pay the difference in costs.
I have been a licensed agent for more than 20 years and would never recommend using insurance as an investment. Much to the chagrin of my insurance agent counter parts I believe in separating the NEED of insurance (costs are high why deplete the value of investments with costs) and the desire to grow savings. If you are young and healthy and can afford to put more into insurance in the hopes that later you will draw off the cash to pay for the policy so you wont have to; good idea. Otherwise a good 20-30 year term policy with a premium that never goes up (so you know it will continue to be affordable) will provide the coverage for mortgages and loss of income. Just get enough coverage!
Use straight low cost high performing mutual funds to invest you can start a plan for as little as $25 or $50 per month. Everyone should be doing this right out of high school or before. Nothing will out perform the market over time not even real estate.