What is the primary purpose of a life insurance policy?

The primary purpose of a life insurance policy is to transfer risk and provide financial support to beneficiaries in the event of the policyholder's death. This means that the policy serves as a safety net, ensuring that loved ones are financially secure after the policyholder passes away. Life insurance can help cover ongoing living expenses, debts, and other financial obligations that the beneficiaries may face, alleviating the financial burden during a difficult time.

While some people may view life insurance as a way to provide funds for specific expenses, such as funeral costs or debt repayment, its broader purpose encompasses the overall financial protection and support for dependents. This protection is essential for families relying on the income of the policyholder and helps ensure their financial stability after the loss.

Other choices, such as providing investment income, covering funeral expenses exclusively, or creating savings for retirement, do not capture the core function of life insurance. Although some policies may offer features related to savings or investment components, the primary objective remains focused on risk transfer and the provision of financial support to beneficiaries.