Published: | Updated: May 17, 2016

Definition - What does Avoidance mean?

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

Insuranceopedia explains Avoidance

Avoidance benefits insurance companies as it can lead to fewer claims. Thus, they can keep more money from premiums to reinvest in the company or as profit. As for the policyholder, a loss can result in various types of damage, not just financial losses; therefore, avoidance also benefits the policyholder. For example, a fire destroys sentimental personal property that a property insurance policy may cover, but recuperating their monetary worth does not restore valuable items nor heal emotional harm. Furthermore, certain insurance policies have clauses that increase premium rates if the policyholder files a claim. Therefore, it is wise for policyholders to practice avoidance.

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