What is an important reason for having life insurance?

Having life insurance is important primarily because it provides financial security for dependents or beneficiaries after the policyholder’s death. Specifically, life insurance is designed to cover essential financial obligations such as mortgage payments, college tuition, outstanding debts, and everyday living expenses. This ensures that loved ones are not left to face financial hardship in the absence of the income that the deceased would have contributed.

In contrast, life insurance does not primarily serve as a tool for financing personal luxuries or funding business ventures, nor does it completely eliminate tax liabilities. While some forms of life insurance may play a role in overall tax planning, the primary purpose remains to provide financial protection and peace of mind for those who depend on the insured individual.