Actually, the idea is quite simple; the complexity comes from the effort to market the product to such a diverse group of people. Perhaps this discussion will help. Should you have questions at any time, please feel free to e-mail me - R. W. Thomas, Jr.
Term insurance used to be fairly simple: The probability of your dying (given your age, health, etc.) times the amount of money you want at your death PLUS an expense fee to cover the cost of issuing the policy and the company's overhead PLUS some reasonable profit for the company PLUS the commission paid for the agent who sells the policy EQUALS The Annual Premium. Each year, as you became older, the price would increase (older = greater chance of dying, right?). Consider this: what would the premium for a $100,000 life insurance policy be for a person age 99? Could it be MORE than $100,000? Possibly! This policy is designed for people that have a short-term need for protection. At your death, it could educate your children, pay off the home mortgage, clear other debts, pay estate taxes, and provide funds for funeral expenses. At the end of the TERM, you would have no more insurance; in theory, because the need is no longer there. Your accumulated investments would provide for your needs at the time of your death.
However, many people realized that there might be a benefit to keeping insurance for as long as they live. The ability to protect the fund (cash value) that builds up in an insurance policy from current taxation, pass the fund along to beneficiaries without having to go through probate and possibly without being taxed, made the concept of a cash-value policy worth considering.