How do I …Use insurance as an investment?

What you need to know

This cash value then earns interest and/or investment income that builds up tax-free. As long as you pay the premiums and the insurer stays in business, the policy sticks around until you die.

There are three basic types:

• Whole life. A policy with a fixed premium, a guaranteed death benefit and a guaranteed return on cash value. This insurance offers safety, but don't expect soaring returns.
• Universal life. Similar to whole life, but your fixed premium is split up into a payment for your death benefit and a portion for investment. The latter portion is put into a mix of fixed-income investments chosen by the insurance company. Your heirs benefit if the investments do well. But even if investments lag, heirs receive a minimum benefit.
• Variable life. Your fixed premium is invested in a basket of stock, bond and money market funds chosen by you. The benefit and value of the policy fluctuates with the performance of the funds.