The main reason you'd want to delete location history on Life360 is for privacy reasons. Maybe you don't want your family to know you've been sneaking off to the mall without them (ssh, don't tell!). Or, perhaps you're just not comfortable with the idea of your location being stored and potentially shared.
Another reason is security. If someone gets access to your Life360 account, they'll be able to see your entire location history, which could be a major security risk. So, deleting your location history can help keep you safe and sound.