The easiest way to gain an understanding of why people buy life insurance
is to take a quick economic time travel tour of this country from the early 1900s to the present day.
From the very beginning, the proceeds of life policies have been used to pay for the funeral of the deceased. The next tiny step was to increase the death benefit
to cover the funeral and the final expenses of the deceased. Final expenses could include medical bills incurred shortly before death, ambulance charges, cemetery costs and even short term debts and installment loans left by the deceased. This gave life insurance an element of survivor protection it had not had before.
By mid-century, many policy owners sought to use insurance as an estate creation or estate protection
vehicle. The estate creation thinking was that "if I live, I will put money aside each month for our retirement and possibly an inheritance for the kids - if I die prematurely, I want to do the same thing."
Of all the financial vehicles available, only life insurance can instantly create an estate.
As we reach the close of the 20th century, the newest innovation of life insurance is the use of accelerated death benefits
. A person suffering from a critical, chronic or terminal illness may incur some huge medical bills. Companies now offer options which allow the policy owner to obtain a significant amount of the death benefit before death actually occurs.