(FORTUNE Magazine) – A bloated fly buzzes around your head as the wall clock interminably ticks away the minutes. On the couch sits the insurance salesman--a hint of Binaca on his breath--who drones on about many meaningless things, until it comes time for the Pitch. "As you get ooolder," he says, leaning across the coffee table, "the cost of term insurance skyyyrockets, so we should really talk about switching you into a whole life policy." He has some dramatic charts to bolster his point, even a laptop that maps out the crisscrossing trajectories of the different premium payments, as the chart below does. You've never trusted this guy, even if he is an old college chum, but you have to admit that what he says seems to make a lot of sense.

His line goes something like this: The term life you bought years ago has a premium that's been rising steadily. Now that you're 45, you still need insurance, but because you're older that premium is set to ratchet up again. By contrast, the whole life he's trying to sell you sports premiums that will stay fixed until you die. After you express some shock at how sky high those premiums are, he releases part two of that pitch: They're high because whole life policies have built-in savings accounts that let you build "cash value" on a tax-deferred basis. You can borrow against it or even pocket it--it's a wonderful little nest egg. The kicker: You can convert your term policy into whole life without a physical. Now you're truly befuddled: Does a switch make sense?

The answer: probably not. Says James Hunt, life insurance actuary at the Consumer Federation of America in Washington, D.C.: "Insurance salesmen will always go for the easy sale and try to push you into full-commission whole life. But there are many products and strategies out there." Weigh each and every one before you make a move.

Your first, most obvious option may be your wisest: Stand pat with term life. Term rates can be so cheap these days, it might pay to stick with them, even into your 60s, long past the age most salesmen will tell you its time to switch to whole life. Can't stomach a premium hike when it's time to renew? Check out the 1-800 number and Internet quote services offering free price comparisons on term policies tailored to you (two are www.quotesmith.com and www.quickquote.com). But be aware that such services earn commissions. They also offer cash-value policies that are, as Hunt puts it, "often schlock."

Your salesman will point out that no term policy can match the tax-deferred status of the cash-value portion of a whole life. He's right, but it's time for a reality check. According to the Consumer Federation of America, the estimated average annual return for a whole life policy held 20 years is just 6%. By contrast, U.S. diversified equity mutual funds have returned 15.1% annually on average over the past 20 years, according to Morningstar Inc., the Chicago research firm. Stocks probably won't match that strong return going forward, but it still makes sense to buy dirt-cheap term and sock away money in a fund that will beat the pants off any whole life policy. And if you crave that tax deferral, put the fund in an IRA.

Does all this mean you should stick with term under any circumstances? No. Your insurance-salesman friend is right when he says that term can get mighty pricey. A 40-year-old nonsmoking male, for example, might pay a first-year premium of $502 for $400,000 of annual, renewable term insurance. (Whole life would cost him $5,741 annually.) But by the time he is 67 years old, the term premium may have just topped $5,576 a year. At age 79, if he were to stick with the same term policy, his premium would have risen to an incredible $27,154 a year. Says professor Travis Pritchett of the University of South Carolina: "Term generally becomes prohibitively expensive for most people in their 60s and 70s." If you plan to keep insurance into those years, you'll want to sign on to some sort of cash value policy in your 40s.

It pays to shop around and find one of the low-load variety. These can shave 10% to 15% off the cost of your death benefit over time. The first type of policy you're likely to come across is universal, which builds cash value much like whole life: You'll still get subpar returns on the cash value, but you can vary the premium amount and even adjust the face amount of the policy from year to year. Low-load variable universal offers the same kind of premium flexibility, but the holder can invest the cash-value portion in mutual funds offered by the insurer. These can goose returns. One overlooked course of action: By your 60s, with the kids grown and the mortgage paid, you might not need life insurance anymore, so let your policy lapse. This tactic has an added benefit. Say that to your insurance salesman loudly and clearly, and he's sure to grab his hat but quick.