What is one key benefit of having insurance?

Having insurance provides protection against financial loss, which is one of its primary functions. When you have insurance, you transfer the risk of potential losses to the insurance company. In the event of an unexpected incident—such as an accident, theft, or health issue—insurance helps cover the costs that could otherwise lead to significant financial strain.

For example, health insurance can cover medical expenses that would be unaffordable out-of-pocket, while homeowner's insurance can help you recover from damages to your home or possessions. This protective layer offers peace of mind, as individuals know they are safeguarded against unforeseen expenses that could deplete their savings or financial stability.

Other options, such as guaranteed investment returns, increased credit score, and tax exemptions, do not accurately capture the fundamental purpose of insurance, which is primarily risk management and financial protection.