Pennsylvania Life and Health Insurance Exam Practice Question
The main purpose of insurance is to:
Correct Answer: C
Rationale: Insurance primarily serves to transfer risk from individuals or businesses to an insurance provider. By paying premiums, policyholders shift the financial burden of potential losses to the insurer, ensuring they are protected against unforeseen events.
Option A, retaining risk, implies that individuals keep the risk, which contradicts the purpose of insurance. Option B, avoiding risk, suggests eliminating risk entirely, which is unrealistic in many situations. Option D, reducing risk, may occur indirectly, but it does not capture the fundamental role of insurance, which is to transfer the financial consequences of risk.
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