What is the primary purpose of life insurance?

The primary purpose of life insurance is to ensure financial protection for beneficiaries. This means that upon the death of the policyholder, the life insurance policy pays out a death benefit to the designated beneficiaries. This financial support can help cover daily living expenses, pay off debts, replace lost income, and maintain the standard of living for the loved ones left behind. The assurance of this financial safety net is a fundamental reason individuals purchase life insurance, as it helps mitigate the financial impact of losing a primary income earner.

While tax benefits, funeral expenses, and retirement investments can be associated with life insurance policies, they are not the main purpose. Tax benefits often come as a secondary advantage but are not the primary reason individuals buy these policies. Similarly, while life insurance can provide funds for funeral expenses, this is just a portion of the broader financial protection it offers. Options that focus on investment for retirement may refer to specific types of life insurance, such as whole life policies, but again, they are not the primary goal of life insurance as a whole. The overarching intent is to secure the financial future of the policyholder’s beneficiaries in the event of their death.