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WHAT IS THE PURPOSE OF LIFE INSURANCE?
Human life has economic value which can be measured to some degree in financial terms. It entails earning capacity as well as the financial dependence of other lives on that earning capacity. In other words, the value of your life can be measured in terms of the present value of that portion of estimated future earnings, under the assumption that when you live long enough to achieve all of your earnings.
Life insurance is a valued contract. When an insured dies, beneficiaries receive the face amount or some other benefits that are specified in the provisions of the contract. Since your life value is associated either with your family (or your business relationship) life insurance provides liquidity in the even of an unexpected death to compensate for the time that you haven't lived to produce your economic value. You should also keep in mind that your earning power alone does not create a need for a life insurance, you should also look at the value of the purpose for which your earnings might be used.
So, one way or another you have dependence or expected to to have some during your lifetime and will be providing support either within your lifetime or through inheritance, where this support may come from your earnings (during your lifetime) or through life insurance proceeds upon your death.
Note: Life insurance also serves other purposes in business world. Please refer to Group Employee Benefits Section for more information regarding this matter.
