A ______ increases the possibility of a loss.

• A. Risk
• B. Peril
• C. Hazard
• D. Exposure

Answer: (C)

Hazard is a condition that makes a loss more likely to happen. In insurance terms, the peril is the actual event that causes a loss (like a collision, theft, or fire). A hazard isn’t the loss itself or the event that triggers it, but a factor in the environment or condition that increases the chance that that event will occur or that the loss will be worse. For example, icy roads or worn tires are hazards because they raise the likelihood of an accident from a peril occurring. Exposure refers to the value or amount at risk, not the factor that increases the probability of loss. So, a hazard best fits the idea of increasing the possibility of a loss.