What does insurance provide protection against?

Insurance fundamentally operates on the principle of risk transfer and financial protection. When an individual or entity purchases insurance, they enter into a contractual agreement with an insurance provider that promises to compensate for specific types of potential losses that may occur in the future. This protection is primarily centered around financial losses, which can arise from various events such as accidents, health issues, property damage, liability claims, and other unforeseen circumstances.

Option B correctly highlights that insurance provides protection against possible financial loss through a contractual promise, which lays the groundwork for how insurance functions. It underscores the financial safety net that insurance represents for individuals and businesses, allowing them to manage risks more effectively.

The other options, while related to various aspects of risk and well-being, do not accurately reflect the core purpose of insurance. For instance, guaranteed investment returns (first option) pertain to investment products rather than insurance, which focuses more on risk mitigation. All types of personal risks (third option) may include those not covered by insurance or outside the financial loss context, as insurance typically covers specifically defined risks. Emotional and mental distress (fourth option) is often not included within the scope of typical insurance contracts, as insurance primarily addresses tangible financial risks rather than psychological aspects.