Insurance plays a crucial role in financial planning. It helps safeguard individuals and their families against unforeseen events and provides a safety net during difficult times. There are several key aspects of insurance that make it an essential component of any comprehensive financial plan.

One of the primary purposes of insurance is to protect against the financial impact of unexpected events such as accidents, illnesses, and natural disasters. By transferring the risk to an insurance company, individuals can mitigate the financial burden that would otherwise fall solely on their shoulders. This ensures that they can maintain their financial stability and continue to meet their long-term financial goals.

Additionally, insurance acts as a tool for wealth preservation and accumulation. Life insurance, for example, provides a means for individuals to leave a lasting legacy for their loved ones. It can be used as an estate planning tool, ensuring that dependents are taken care of, mortgages are paid off, and financial security is maintained even after the policyholder has passed away.