What is the primary aim of insurance?

The primary aim of insurance is to protect individuals or entities from financial loss. It serves as a safeguard against unforeseen events that could lead to significant financial hardship, such as accidents, theft, natural disasters, or health issues. By purchasing insurance, policyholders transfer the risk of potential loss to the insurer, who then takes on the obligation to provide financial compensation in the event that a covered loss occurs. This mechanism effectively enables people to manage risk and provides peace of mind, knowing that they have a safety net in place.

In this context, wealth accumulation, investment in securities, and savings plans serve different financial objectives and do not align with the fundamental purpose of insurance. Insurance is specifically designed to mitigate risk and provide financial protection, rather than generating wealth or serving as an investment vehicle.