In risk and hazard terminology, which term describes factors that increase the likelihood of a loss?

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

Answer: (D)

Hazard is a condition or circumstance that makes a loss more likely to occur or to be more severe once a peril happens. In auto damage and theft context, hazards are things like icy roads, a broken steering column, or leaving keys in the ignition — these factors don’t cause the loss by themselves, but they raise the chances that a loss will occur if a peril (like a skid, theft, or collision) happens.

This differs from exposure, which is simply how much property or how many people are at risk (the size of the potential loss). Peril is the actual event that causes the loss (the cause of damage or theft). Risk is the overall probability and severity of loss, incorporating both the hazards present and the exposure involved.