What protection does insurance provide to policyholders?

Insurance primarily provides protection against financial loss due to covered events. When policyholders pay premiums, they essentially transfer the risk of specific potential financial losses to the insurance company. This means that if a covered event occurs, such as an accident, theft, or damage to property, the insurance company helps mitigate the financial impact by compensating the policyholder, thus preventing significant economic hardship.

This benefit is crucial because it allows individuals and businesses to recover from unforeseen events without facing severe financial distress. In contrast, the other options suggest unrealistic or misleading outcomes related to insurance. For instance, insurance does not guarantee profits, nor does it ensure continuous coverage without regard to circumstances. It also does not eliminate all financial responsibilities, as policyholders may still face deductibles or uncovered losses.