Darvond: Allow me to smash your metaphor asunder. When going from Red to Orange, do I bother with naming off every single color between? Each color may be unique, but there is no point in trying to define each one, especially seeing as we can only see so many colors anyway.
One of these is red, one is reddish orange, and the other is orange. Only in a very specific niche area do you need to bother to go any deeper than that and declare, 'Banana Spackle Pinkish Blue Viridian Yellow Red.'
In that case you are in front of people from different categories. It's not a theoretical classification of possibilities. When you encounter a person from a specific sexual identity, then having a term to describe it becomes relevant. And LGBT doesn't cut it, because it doesn't cover all realities.
To get back to the silly metaphor, if I show you a bolt and want you to describe it, you may find yourself in a situation where both "orange" and "red" would be a bit wrong. Having a specific word makes communication more accurate and efficient.
And we are not talking of objects, but of people. So, (self-)identification may matter a bit here. A banana would be less annoyed by "well, no it's not exactly that" and "I DON'T CARE. CLOSE ENOUGH, YOU'RE THAT TO ME".
Approximation, when describing people's realities, sometimes lead to confusion, misunderstanding, various problems.