California Life and Health Insurance Practice Exam 2026 – Complete Test Prep

The primary purpose of life insurance is to provide financial protection to beneficiaries upon the death of the insured. This means that when the policyholder passes away, the life insurance policy pays out a predetermined sum of money to the beneficiaries designated in the policy. This financial support is essential for helping loved ones cover expenses such as funeral costs, outstanding debts, and ongoing living expenses, ensuring they are not financially burdened by the loss of income.

While life insurance can indeed offer some tax advantages, such as tax-free death benefits for beneficiaries, or even accumulate cash value in certain types of policies, these aspects are secondary to its main goal of providing financial security for the insured's family. Moreover, while some individuals might use life insurance as part of an investment strategy or for retirement savings, this is not the primary objective of life insurance itself. Instead, the core function remains focused on safeguarding the financial well-being of dependents in the event of the policyholder’s death.