- Risk Management
- Savings and Investment
- Legal Requirement
- Tax Benefits
Correct Answer:
Risk Management.
Insurance is essential to a healthy financial plan because it protects individuals and families from significant financial losses caused by unforeseen events. It acts as a financial safety net, ensuring that one doesn’t face financial ruin in case of emergencies like medical issues, property damage, or liability claims. This allows individuals to maintain their financial stability even in challenging times.
While other options (like tax benefits or peace of mind) are valid secondary advantages, the primary purpose of insurance in financial planning is risk management.
