Privacy.

Utxos are like individual coins... gold dust is not very convenient to use for sales while a gold bar that can have nuggets cut from it is more convenient and therefore cheaper to use as money.

If you have a (bitcoin) bar too big, and remember that the blockchain is public, then it makes you a target. Whatever someone can do to demystify who owns that bar, they will do and then they will try to use that information to target you. Also having lots of smaller bars in the same address is proof that 1 person owns all that bitcoin.

Addresses are like pockets, and you have infinite pockets in the blockchain. If you are being robbed physically, you might have cash in 2 pockets, but you pull out the cash in 1 pocket and the robber leaves. But if you put all of your cash in that pocket, they will see it when you try to short change them and demand all of it.

Separating nuggets of bitcoin (utxo) into separate pockets (addresses) is good for overall privacy and security.