What is the primary purpose of insurance?

The primary purpose of insurance is to provide financial protection against losses. This means that insurance is designed to help individuals and businesses mitigate the financial impact of unexpected events, such as accidents, health issues, property damage, or liability claims. By transferring the risk of potential losses to an insurance provider, policyholders can ensure that they are financially covered in times of need. This function of insurance helps to create a safety net, allowing people and organizations to recover from adverse situations without facing crippling financial consequences.

In contrast, while accumulating wealth and serving as an investment tool may be benefits of certain financial products, they are not the fundamental purpose of insurance. Insurance is primarily about risk management and loss protection, rather than wealth accumulation. Additionally, while compliance with government regulations is important for insurance providers, it does not represent the primary objective of the insurance itself.