What is the primary purpose of a life insurance policy?

The primary purpose of a life insurance policy is to offer financial protection to beneficiaries after the insured's death. Life insurance serves as a safety net, ensuring that loved ones are financially secure in the event of the policyholder's passing. The death benefit from a life insurance policy can help cover funeral expenses, pay off debts, and provide ongoing support for the beneficiaries' living expenses, allowing them to maintain their standard of living despite the loss of income from the deceased.

While life insurance policies can indeed have investment components, retirement benefits, or potential tax advantages, those features are secondary to the core function of life insurance, which is to provide monetary assistance to a policyholder's beneficiaries when they are no longer able to provide support. This fundamental purpose places life insurance as an essential component of financial planning and risk management for individuals and families.