Final Answer:
The main purpose of insurance is to protect against the risk of economic loss. So, the correct option is d. protects against risk of economic loss.
Step-by-step explanation:
Insurance serves as a safeguard against various risks that individuals or businesses face in their daily lives or operations. Its fundamental purpose is to provide a safety net against financial setbacks resulting from unexpected occurrences.
Primarily, insurance offers protection by transferring the risk of potential losses from an individual or entity to the insurance company. This transfer of risk allows individuals or businesses to pay a relatively small premium in exchange for coverage against potentially significant financial losses. For instance, in the case of an unexpected event such as a natural disaster, accident, or health issue, insurance ensures that the policyholder is financially supported, reducing the impact of the loss.
Unlike other financial instruments, insurance doesn't directly aim to provide savings opportunities or increase current spending power. While some policies might have components that accumulate cash value over time, the primary objective is risk mitigation rather than wealth accumulation.
Moreover, insurance doesn’t necessarily encourage careful budgeting or increase current spending power. Instead, it provides a sense of security and financial stability, allowing individuals and businesses to navigate through uncertainties without facing severe financial burdens that could potentially lead to bankruptcy or significant setbacks.
In essence, the primary goal of insurance remains the mitigation of economic risk, offering peace of mind and financial stability in the face of unforeseen events, which might otherwise lead to substantial economic loss.
So, the correct option is d. protects against risk of economic loss.