What does mitigation refer to in insurance contexts?

Mitigation in insurance contexts specifically refers to strategies and actions taken to reduce the likelihood or severity of potential risks or losses. When individuals or businesses implement mitigation measures, they are essentially investing in proactive steps to minimize potential damage or costs associated with unforeseen events, such as natural disasters, property damage, or liability claims.

For example, a homeowner might install a sump pump to mitigate water damage risk or a business might implement safety training programs to reduce workplace accidents. These actions not only help in protecting the insured property or assets but can also lead to lower insurance costs over time, as insurers often reward those who take measures to reduce risks. Therefore, understanding mitigation as a means of reducing risk is crucial in both personal and commercial insurance contexts.