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Some insurance companies are criticized because it's not always clear how your premiums are used nor how the value of your policy is calculated. At a state level, insurance departments and commissioners do their best to protect your interests, but the majority of consumers are not well protected. This is less important with term insurance, but whole life and universal life policies have an investment element that slowly builds up and gives you a cash value in addition to the minimum guaranteed death benefits. Getting the most out of these more expensive policies is important.

Note that, unlike "ordinary" policies, cash-value policies do not lapse if you stop paying the premiums. Once you reach a minimum threshold, the policies remain valid and the investment element continues to accumulate value - this assumes the wider economy is doing well and the stock and bond markets provide a worthwhile return. So the best way of looking at these policies is as a saving fund. If you had run a savings account in your bank, this would give you a nest egg to draw down when you retired. You can treat cash-value policies in the same way.

Almost everyone with a whole or universal life policy pays long enough to reach protected status. Most take out a policy during their twenties and are still paying twenty or thirty years later. What seems a high premium when you started becomes more affordable as inflation works in your favor. Now the big decision is whether to continue paying. The longer you pay, the better the benefits. But if there's a family emergency, you can stop paying, withdraw some of the cash or take a loan, and keep the policy valid for when you die. If you hold a life policy, you should receive an annual statement telling you the minimum cash value and the guaranteed death benefit. But, with both a whole and universal policy, you can contact your insurer at any time, and get an up-to-date statement.

If you simply make a withdrawal or take a loan, check the effect on the death benefits. Always get the most information from the life insurance company before taking the decision. One key issue with a loan is the amount of interest payable. Borrowing always has a cost attached to it and, unless you want the interest to come out of the remaining cash value, you should make regular payments back to the company whenever you can afford it. One option to consider is using a cash withdrawal to buy a long-term care insurance policy. As everyone now lives longer, making provision for future health needs makes good sense. Alternatively, think about buying an income annuity. The only limit on your use of the cash is how much tax-free death benefit ultimately passes to your heirs. You can be selfish and use the money for your own comfort and protection or plan for your family's future. One word of warning. Do not be tempted to surrender your life insurance policy. You will owe back taxes on all the investment gains made since the policy came into force. Paying this as a lump sum is a big hit. It's always better to leave the policy in force and draw down cash or take a loan