Is life insurance considered a davar that is rauy lavo, or is it considered a davar hamuchzak? Is there a difference with regards to this between a whole life policy which can generate cash values, interest for the benefit of the owner, be used as a mashkon to borrow against or provides other benefits for the owner; and a term life policy which basically only remains in effect until the end of the contract , generates no cash value or benefit for the owner and would therefore be only a davar harauy lavo. .
Note: in practice there may be some other benefits to having a term life contract that I am not aware of.
A life insurance policy is considered rauy because it is money that the insurance company owes to him, in the event that it will be applicable. In the event that it wouldn’t be applicable, the person wouldn’t get anything from it. This would apply even if the owner of the policy is able to somewhat benefit from the money while he is alive. This is because the money essentially is in the possession of the insurance company, even though they let you borrow against it, and give you profit on the money. Additionally, the part of the money gained from life insurance above what was paid in premiums is profit that was realized only after he person died.
Pischei Choshen ( Yerusha) 10 ftnt. 86.