Which of the following is true regarding the definition of insurance?

Insurance is fundamentally defined as a risk management tool. This concept reflects the primary purpose of insurance, which is to provide financial protection against potential losses or risks that individuals and businesses might face. By transferring the risk from an individual or business to an insurance company, policyholders can mitigate the financial impact of unforeseen events, such as accidents, natural disasters, or liability claims.

Option A highlights the essence of insurance and underscores its role in helping both individuals and businesses manage risks effectively. It provides a framework for understanding how insurance works, emphasizing its importance in financial planning and risk assessment.

The other options present more restrictive or inaccurate views of insurance. For instance, stating that insurance is only for personal assets limits its application and overlooks coverage for commercial and liability risks that businesses might face. Claiming that insurance is mandatory for all business entities fails to recognize that while certain types of insurance are required by law in specific situations (like worker's compensation), not all businesses are obligated to carry insurance. Finally, defining insurance as covering only property damage disregards the comprehensive nature of many insurance policies, which can cover liability, personal injury, and other types of risks beyond just property damage.