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Purpose of Life Insurance People or entities purchase life insurance for various reasons, and the reasons can change over time. A newly married couple, for example, may purchase insurance for income replacement; high-earning professionals may purchase it to build supplemental retirement income because they have maxed out contributions to their 401(k) and other qualified plans; parents may purchase it to fund education or to provide incentive or reward “pensions” for their children; grandparents may purchase it to provide legacy gifts to their children, grandchildren, or charities; high-net-worth individuals may purchase it for tax-advantaged cash accumulation; risk-taking entrepreneurs may purchase it for asset protection purposes. Under a life insurance contract, a person or entity (the policy owner and/or applicant) purchases insurance coverage on the life of a person (the insured) for a stipulated ...
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