What is the primary purpose of a life insurance policy?

The primary purpose of a life insurance policy is to provide a death benefit. This means that in the event of the policyholder's death, the insurance company pays a specified amount of money, called the death benefit, to the beneficiaries named in the policy. This financial support can help cover final expenses, replace lost income, pay off debts, or provide for the ongoing needs of dependents. The assurance of this benefit is central to the concept of life insurance, offering peace of mind that loved ones will be taken care of financially in the absence of the policyholder.

While life insurance can have features that contribute to savings or investment for retirement—like cash value accumulation in permanent policies—these are secondary benefits. The fundamental and primary function of life insurance remains the provision of financial security through death benefits.