What is a primary function of life insurance policies?

Life insurance policies primarily serve the function of ensuring financial protection for dependents upon the policyholder's death. This safety net is crucial because it provides beneficiaries with financial support to cover living expenses, debts, and other obligations that may arise after the policyholder's passing. The fundamental purpose of life insurance is to replace lost income and maintain the family's standard of living during a difficult time.

While some life insurance products, such as whole or universal life policies, can also offer investment returns, this is not their primary function. Their design is centered around providing a death benefit to protect the insured's loved ones. Similarly, minimizing taxes on assets or offering health coverage are not primary functions of life insurance policies; these aspects may be relevant in specific contexts but do not define the core purpose of life insurance.