Final answer:
Individuals purchase life insurance primarily to provide financial security for their loved ones after their death. It ensures that surviving family members have support for funeral costs, debts, and living expenses, rather than to accumulate wealth, cover medical expenses, or receive tax deductions.
Step-by-step explanation:
One of the reasons individuals purchase life insurance is B) To provide financial security for loved ones. Life insurance is a financial service that individuals use to ensure that in the event of their untimely death, their family or dependents are left with financial support. This kind of insurance is particularly important for preventing significant financial distress for the surviving relatives, as it can help with expenses such as funeral costs, outstanding debts, and ongoing living costs. Households, as well as firms, utilize insurance to guard against potentially significant financial losses. Insurance operates by collecting regular premiums from the insured, which are priced based on the likelihood of certain events occurring within a pool of insured people. When a covered event occurs, such as the death of the insured person in the case of life insurance, the family receives payments from the accumulated pool of premiums.
While life insurance can create a pool of cash accessible for borrowing, thereby indirectly supporting financial or investment goals, the primary purpose is not to serve as an investment vehicle for wealth accumulation, cover routine medical expenses, or provide large tax deductions. Instead, it offers crucial financial protection and peace of mind for policyholders and their beneficiaries.