Life insurance and saving

As well as paying out a sum of money on death, many life insurance contracts also pay out a sum of money after a given time (in which case it is known as an endowment policy), and may also pay out a cash value if the policy is cancelled early. In many countries, such as the US and the UK, tax law provides that the interest on this cash value is not taxable under certain strict circumstances.

This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death. Wealthy individuals buy life insurance policies as a means for avoiding income taxes and estate taxes.

If the tax benefit exceeds the fees charged by the insurance company for maintaining the policy, then the policy serves as a life insurance tax shelter. There is much controversy surrounding this practice, and the financial industry is deeply divided about whether or not these practices work as advertised.

What is Insurance - Home

Table of Contents

What is Insurance Introduction

History of insurance

Types of insurance:

• Auto insurance
  (car insurance or motor insurance)

• Home insurance
  (homeowners insurance or household)

• Boiler insurance
  (machinery and equipment insurance)

• Title insurance

• Health Insurance
  (private and public health insurance)

• Life insurance
  (whole life or term life insurance)

• Political risk insurance

Types of insurance companies

Life insurance and saving

Criticisms of the insurance industry
(arguments for universal heathcare)