I have a couple issues with your posting here. I am a licensed insurance agent and financial advisor. I disagree with some of your statements here and you have also omitted many reasons why people would need insurance.

First off, the cash value in a whole life policy does NOT disappear. If the client were to take out a Universal Life policy, the cash within the plan is paid out, tax free, to the beneficiary on top of the face value of the policy. Also it should be mentioned that life insurance provides some key features that mutual funds do not.
1. tax free growth of the funds where mutual funds are taxable each year.
2. Creditor protection – funds within a life insurance policy cannot be seized unless they were unlawfully hidden. Mutual funds and any unregistered investment can be seized.
A reason this would be handy? If you were to become severly ill and the govt has to cover your care, they will come after every asset you own to cover the bill, including your house! They cant touch a life insurance policy.
3. Tax free at time of death – All the funds that are paid from an insurance policy are tax free, they bypass probate completely. If you have a mutual fund investment, the govt is going to get approximately 25% of that money as all capital gains taxes are due the year of death.

Some other reasons why someone might take out a Universal Life policy is for estate planning reasons. An individual or couple may have a sizeable estate at the time of their passing which then incurs a large tax bill in the year of passing. Because there is no concrete way to determine what that tax bill will be or when it will happen, we setup a Universal Life policy sufficient to cover the current tax burden and then fund the policy so it will grow with the tax burden.
Most estates are not liquid or have limited liquidity so there is a need for immediate cash at time of death. Too many families lose their estates or recieve it for pennies on the dollar because of insufficient planning.

You stated that when you die your estate is sold then the bills are paid and you are buried. What would that family do when the debt is larger than the estate?
Guess who gets that nice little bill?
I recently had to quote a 63 yr old couple on a fixed income what it would cost to cover their debts with a term coverage. Imagine what their faces looked like when I told them it would be $320 a month!!!

You stated that the return you get on your cash value is alot less than if you invested in mutual funds. Well this is also untrue. You can invest your funds in an insurance policy almost identical to how you would with mutual funds. Clients can even handle their own investments if they choose.

You stated that children should not have insurance policies. I disagree with this as well. There are alot of people out there that do not qaulify for insurance due to health reasons. If these people had insurance in place prior to their declining health they would have been able to cover their responsibilities.
I will give you an example. I have setup a universal life policy for my 4 yr old son. I setup a 50k policy with a rider that allows him to add 50k units as he needs them without having to provide proof of good health. When he gets a family of his own, he will be able to have the level of protection he needs without worrying about any health condition he may or maynot have. This policy costs $20 a month and is a sound investment in my sons future.

Dont get me wrong, there is some sound advice here but every client is different and has differing situations. While buying term and investing the difference is a good strategy, it is not always the best one.
As always, everyone should sit down with a qualified financial advisor to determine what is the right course for them and their families.
The best advice you can give anyone is to get educated. Know your options and obstacles then make an informed decision.

Cheers,

Vince Dempsey