What is the primary purpose of insurance?

The primary purpose of insurance is to provide financial protection against loss. This importance revolves around the concept of risk management, where insurance acts as a safety net, helping individuals and businesses mitigate the financial impact of unforeseen events such as accidents, natural disasters, illness, or death. By pooling resources through collected premiums, insurance enables policyholders to share risks, ensuring that no single individual bears the entire burden of a significant loss alone.

Insurance offers peace of mind, allowing people to manage their risks more effectively. With financial backing in place, policyholders can recover from losses more quickly, thereby maintaining stability in their lives and businesses. This core objective underscores the essential role of insurance in fostering economic security and resilience in society.