What is the primary purpose of insurance?

The primary purpose of insurance is to provide financial protection against loss or damage. Insurance acts as a risk management tool that transfers the financial burden of a loss from an individual or entity to an insurance company. When an insured event occurs, such as an accident, natural disaster, or health issue, the insurance policy helps cover the costs associated with that event, thereby minimizing the financial impact on the insured. This protection allows individuals and businesses to recover more swiftly from such incidents and can include coverage for various risks, such as property damage, liability, health expenses, and more.

While other options may touch on financial aspects, they do not capture the fundamental role of insurance in providing a safety net against unpredictable events. The notion of guaranteeing profits or managing all financial obligations does not reflect the nature of insurance, which is fundamentally about risk transfer and security rather than profitability or comprehensive financial management.