Changing one's lifestyle to minimize a known risk is an example of what insurance concept?

Changing one's lifestyle to minimize a known risk exemplifies the concept of risk reduction. This approach involves implementing changes or adopting behaviors to decrease the likelihood or impact of a potential loss. For example, a person might quit smoking to lower the risk of developing health-related issues or engage in regular exercise to mitigate the chances of illness or injury.

Risk reduction aims to manage and minimize risks rather than eliminating them entirely. It acknowledges that while some risks cannot be avoided, taking proactive steps can significantly lower their consequences. This proactive behavior is crucial in the context of insurance, as individuals who engage in risk reduction may find themselves paying lower premiums, reflecting their lower risk profile.

In contrast, other concepts like risk assessment involve analyzing and evaluating risks without necessarily taking action, risk acceptance means acknowledging a risk and choosing to endure its potential consequences, and risk avoidance is about eliminating the risk altogether. These differ from risk reduction, which focuses on actively lowering the severity or likelihood of a risk through lifestyle changes.