Yes, your estate does include life insurance. While you are alive, it just includes the cash value available in your policy or policies. After death, the life insurance proceeds paid out to beneficiaries are included in the value of the estate.
If a spouse is alive, there will not be any estate tax consequences. It is when the surviving spouse dies that the life insurance proceeds on that spouse can a taxable event (or if the first spouse to die left insurance money to the second to die, and those proceeds had not been spent or distributed when the second spouse died).
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If a spouse is alive, there will not be any estate tax consequences. It is when the surviving spouse dies that the life insurance proceeds on that spouse can a taxable event (or if the first spouse to die left insurance money to the second to die, and those proceeds had not been spent or distributed when the second spouse died).