Avoidance

What Does Avoidance Mean?

Avoidance is the practice of reducing losses by refraining from activities perceived as hazardous or risky. In the context of insurance, even if an individual, family, or business has coverage for a particular risk, they can still practice avoidance to minimize the likelihood of the insured events occurring.

Insuranceopedia Explains Avoidance

Avoidance benefits insurance companies by potentially leading to fewer claims, allowing them to retain more money from premiums for reinvestment or profit. For policyholders, avoidance can reduce not just financial losses, but also other types of damage. For instance, a fire may destroy sentimental personal property, which a property insurance policy may cover, but recovering its monetary value does not restore the items’ emotional significance. Additionally, some insurance policies include clauses that increase premium rates if the policyholder files a claim. Therefore, it is wise for policyholders to practice avoidance to minimize both emotional and financial harm.