This is the primary and essential purpose of life insurance. It is not a tax-sheltered investment for you. To the best of my knowledge, the primary and essential purpose is still in vogue-none of us will leave this world alive. Yes, in a very real sense, life insurance is capital formation. Capital is usually defined as the value of accumulated goods, which are devoted to the production of other goods, and accumulated possessions calculated to bring in income.
Formation is defined as an act of giving form or shape to something, or of taking form.
After an insured person dies, capital is formed when the death benefit or in other words, the face amount of the life insurance policy is paid to the beneficiary. Looking upon life insurance as a vehicle for capital formation will allow you to determine whether or not it is the proper financial service product for you to use to create capital for your own specific needs. Needs which could take the form of protection for your family, protection for a business obligation, or provision of supplemental retirement income. There are no living benefits from term insurance because there is no cash value building up in the form of self-insurance. As a result, capital cannot be formed before the insured dies.