Permanent life aims to provide protection and growth. The cash that builds in these policies is not taxed until it's withdrawn, and you can avoid those taxes by taking a loan against the account, which reduces the death benefit. This is its main advantage. Here's more on cash value life insurance.

"Critics will say, 'You'll pay interest and also you're removing cash value and putting the policy at risk of lapsing.' There's some truth to that," says Drury. You want to prevent a lapse. When a policy lapses and you've borrowed money from it, the IRS looks at that withdrawal as income, making it a taxable event.

Permanent life insurance as a retirement fund may make sense for high earners who max out other tax-deferred savings. It also may benefit older folks who have illiquid estates, like small business owners who want to leave money to someone, yet the death benefit is more than what they'd be able to save. Plus, anyone in a position to retire early, in their 40s or 50s (before they can access their qualified plans) may be a candidate for permanent life since there are no age restrictions to funding life insurance.

This strategy is not for people within 10 to 15 years of retirement.

In the last 15 to 20 years, "the interest on the loan is a little bit higher than the earnings on the cash values. It used to be a wash," says Drury. "You earned about as much as you were paying -- you were basically accessing that money for free. It's still pretty darn close."

Return of premium term life insurance

Return of premium (ROP) term life insurance policies are a special variety of level term policies. If the customer hasn't passed away during the term of the policy, he gets all his premium money back. You do pay considerably more in premiums for this option than you would for a regular term life policy.