What is the primary purpose of life insurance?

The primary purpose of life insurance is to offer financial protection to beneficiaries. This function ensures that in the event of the policyholder's death, the selected beneficiaries receive a death benefit that can help cover immediate expenses such as funeral costs, outstanding debts, and ongoing living expenses. This financial support can provide peace of mind during a difficult time, allowing beneficiaries to maintain their quality of life without the burden of sudden financial loss.

While other options like providing investment opportunities, reducing tax burdens, or funding retirement accounts may have relevance in certain contexts or specific types of policies, they do not encapsulate the fundamental aim of life insurance. The basic intent of life insurance is to safeguard loved ones and ensure their financial stability, making it a crucial tool for risk management in personal finance.