Which statement best defines the purpose of insurance?

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Multiple Choice

Which statement best defines the purpose of insurance?

Insurance is a risk-management tool that shifts financial risk from an individual to a insurer. By paying a premium, a policyholder gains protection against potentially large monetary losses that come from uncertain events such as illness, property damage, liability, or income disruption. The idea is to pool risk across many people so that the cost of rare, expensive losses is predictable and affordable for each person. This purpose centers on protecting financial well-being after a covered event occurs, not on funding loans, guaranteeing jobs, or covering risks that aren’t primarily financial in nature.

Insurance is a risk-management tool that shifts financial risk from an individual to a insurer. By paying a premium, a policyholder gains protection against potentially large monetary losses that come from uncertain events such as illness, property damage, liability, or income disruption. The idea is to pool risk across many people so that the cost of rare, expensive losses is predictable and affordable for each person. This purpose centers on protecting financial well-being after a covered event occurs, not on funding loans, guaranteeing jobs, or covering risks that aren’t primarily financial in nature.

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