PSI Life Exam Practice Test 2025 - Free Life Insurance Exam Questions and Study Guide

The primary purpose of life insurance is to provide financial protection to beneficiaries upon the death of the insured. This means that when the insured person passes away, the life insurance policy pays out a death benefit to the designated beneficiaries, which can help them cover expenses such as funeral costs, mortgage payments, or everyday living expenses. This financial protection is crucial for individuals who have dependents or financial obligations, ensuring that their loved ones are supported during a challenging time.

While life insurance can sometimes serve as an investment vehicle, allow borrowing against premiums, or offer potential tax benefits, these aspects are secondary to its main function of providing a safety net for beneficiaries. The core focus of life insurance is to ensure that, in the event of the insured's death, the financial burden on their loved ones is alleviated through the support offered by the policy's proceeds. Understanding this primary purpose helps clarify the fundamental role life insurance plays in financial planning and risk management.