What is the primary purpose of a life insurance policy?

The primary purpose of a life insurance policy is to cover final expenses and provide financial security. Life insurance is designed to ensure that, in the event of the policyholder's death, their beneficiaries receive a predetermined sum of money, which can help cover costs such as funeral expenses, debts, and ongoing living expenses. This financial support can alleviate the burden on loved ones during an already difficult time, ensuring they can maintain their lifestyle and meet their financial obligations even in the absence of the deceased.

While saving for retirement, providing income during disability, and reducing estate taxes are important financial strategies, they are not the fundamental objectives of a standard life insurance policy. Life insurance focuses primarily on safeguarding the financial well-being of dependents or beneficiaries after someone's death, making the provision of financial security its core purpose.