What is the main function of insurance?

The main function of insurance is to provide a safeguard against uncertain events. Insurance operates on the principle of risk management, where individuals and businesses transfer the financial risk of potential losses to an insurance company. By paying premiums, policyholders secure coverage that will help them recover from losses due to unexpected events such as accidents, natural disasters, or illnesses. This essentially provides peace of mind, as individuals are able to protect their financial interests and mitigate the impact of unforeseen circumstances on their lives or businesses.

The other choices do not accurately encapsulate the primary role of insurance. Increasing profits for insurance companies may be a secondary objective, but it is not the fundamental purpose of insurance itself. Similarly, while insurance might sometimes be used as collateral for loans, that is not its main function. Finally, facilitating legal battles over claims is contrary to the essence of insurance, which is to provide protection and resolve claims efficiently and fairly, rather than to engage in disputes.