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Get access to the detailed solutions to the previous years questions asked in IIM IPMAT exam
Option 2 is the best choice. The given sentence says the philosophical cut at one's core beliefs, values, and way of life 'is difficult enough', suggesting there is more to add to this.
The sentence following option 2 begins with 'what's worse...' fitting in well with the given sentence. Also note the the first part of the given sentence, 'this philosophical cut at one's core beliefs, values, and way of life', is explained by the lines before option 2.