Why Was Life Insurance Created? 
The idea of insurance first began as a way of reducing risk for given transactions . The purpose of insurance as we 've come to know it today is to shift the risk of a catastrophic financial event to a third party -LRB- the insurance company -RRB- by paying a premium to the carrier in exchange for coverage . In life insurance , the policy creates cash upon the death of the insured . Many people buy life insurance for different reasons - such as paying off debts so the family members wo n't be stuck with those bills -LRB- e.g. mortgage , cars , etc. -RRB- , income replacement , estate planning , leaving a legacy to loved ones , just to name a few . 