Why do individuals commonly purchase life insurance?

Individuals commonly purchase life insurance primarily to provide for income loss upon the death of the insured. This financial product is designed to ensure that beneficiaries can maintain their standard of living after the untimely passing of a loved one. Life insurance can replace lost income, pay off debts, and cover everyday living expenses, thereby offering financial security to surviving family members during a challenging time.

While the other options may represent valid financial considerations, they do not capture the primary motive for life insurance ownership. Covering tax liabilities on investments might be a relevant aspect of estate planning, but it does not align with the core purpose of life insurance. Similarly, while funding educational expenses can be a goal for some, life insurance is generally not tailored specifically for this purpose. Lastly, using life insurance as an investment for long-term wealth doesn't reflect its fundamental role, which is risk protection and income replacement rather than serving primarily as an investment vehicle. This shows the broader understanding of life insurance when viewed in terms of immediate financial needs for dependents rather than alternative uses.