Mississippi Property & Casualty Practice Exam 2026 – Comprehensive Prep Guide

Risk avoidance is a strategy that involves taking proactive measures to eliminate or lessen the chances of a potential loss occurring. In the context of insurance practices, this can effectively be implemented by altering behaviors or decisions that could expose an individual or organization to risk. For instance, if a business identifies a particular activity that carries significant risk—such as operating machinery without proper safety protocols—they can avoid that risk by altering their processes or ceasing that operation altogether. This approach minimizes the likelihood of claims and losses, ultimately leading to a lower risk profile for the insured party.

While the other options describe various risk management techniques, they do not fall under the category of avoidance. Increasing premiums may reflect risk levels but does not change the underlying risk itself. Diversifying investments can mitigate the impact of losses but does not eliminate the risks associated with them. Purchasing multiple insurance policies can provide broader coverage, but it does not address the foundational risk behaviors that can lead to losses in the first place. Risk avoidance specifically targets the removal of those high-risk activities to prevent losses from occurring.