What is the primary purpose of life insurance?

The primary purpose of life insurance is to provide financial protection to beneficiaries after the insured's death. Life insurance policies are designed to offer a lump-sum payment, known as the death benefit, to the beneficiaries chosen by the policyholder. This death benefit can help replace lost income, cover debts, and ensure that the beneficiaries can maintain their standard of living or meet financial obligations in the absence of the insured.

When an individual passes away, the financial burden can significantly impact their loved ones, especially if the deceased was a primary income earner. Life insurance serves as a financial safety net, alleviating the stress of potential financial hardships for the beneficiaries. It is a fundamental tool for long-term financial planning, allowing families to manage their financial futures despite the loss of a loved one.

The other options, while related to financial planning, do not capture the primary purpose of life insurance. While it can play a role in retirement income or medical expenses, and some policies may accumulate cash value, these are secondary aspects compared to the core function of providing financial support to the beneficiaries after the death of the policyholder.