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Life insurance is not a popular subject to talk about, but it isn't just about what happens if you were to die. There are several different types of Life Insurance but I'm only going to talk about a couple different policies and the features associated with them. Some policies not only provide a death benefit, but do have a value outside of that and can be used as a tax sensitive investing tool.

Term:
This is the most common of the Life Insurance policies. It's the cheapest because it is based on your current age and health. It usually comes in 10, 20, and 30 year terms. It is good because it is cheap, unfortunately it is like car insurance. Meaning you have nothing left at the end of paying all your premiums. You pay for severaly months or years and if you don't die you don't have anything to show for it.

Permanent:
Permanent life insurance is life insurance that remains in force until the policy matures (pays out), unless the owner fails to pay the premium when due. The policy cannot be cancelled by the insurer for any reason except fraud on the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollars face value can be relatively inexpensive to a 70 year old becasue the actual amount of insurance purchased is much less than one million dollars. The owner can access the money in the cash value by withdrawaing money, borrowing the cash value, or surrendering the policy and receiving the surrender value. There are three type of permanent insurance, whole life, universal life, and endowment.

Whole Life:
Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums and mortality and espense charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life are premium inflexibilty, and the internal rate of return in the policy may not be competitive with other savings alternatives. Riders are available that can allow one to increase the death benefit by paying an additional premium. The death benefit can also be increased through the use of policiy dividends. Premiums are much higher than term insurance in the shourt-term, but cumulative premiums are roughly equivalent if policies are kept in force until average life expectancy. Cash value can be accessed at any time through policy "loans". Since these loans decreas the death benefit if not paid back, payback is optional. Cash values are not paid to the beneficiary upon the deatch of the insured; the beneficiary receives the death benefit only.

Universal:
Universal life insurance (UL) is a relatively new insurance product intended to provided permanent insurance coverage with greater flexibility in premium payment and the potential for a internal rate of return. A universal life policy includes a cash account. Premiums increase the cash account. INterest is paid within the policy (credited) on the account at a rate specified by the company. This rate has a guaranteed minimum but usually is higher than that minimum. Mortality charges and administrative costsa re charged against the cash account. The surrender value of the policy is the amount remaining in the cash account less applicable surrender charges, if any. With all life insurance, there are basically two functions taht make it work. There's a mortality function and a cash function. THe motrality function would be the classicdal notion of pooling risk where teh premiums paid by everybody else would cover the death benefit for the one ot two who will die for a given period of time. The cash function inherent in all life insurance says taht if a person is to reach age 95 to 100 (determined by the company) then the policy matures and endows the face value of the policy.

Variable Universal Life Insurance:
Variable universal life insurance (VUL) is not the same as Universal Life, even though they both have cash values attaced to them. These differences are in how the cash accounts are managed; thus having a great effect on how they are treated for taxation.

Money passed to the beneficiary is not taxable by the government as ordinary income, but could be taxed as part of the estate.

There is often a holding period for the life insurance policy. Meaning, there is often a 2 year period a person must wait before they give money by committing suicide. This makes it so if someone wants to kill themself, they can't run out and buy a big policy. They have to wait 2 years after issuance. This is a common suicide deterrant.

Insurance is complex and this is only the basics. Feel free to inquire about more details.