Which term describes the chance of loss to an insured person, property, or activity?

Which term describes the chance of loss to an insured person, property, or activity?

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

Answer: (A)

Risk is the chance of loss to an insured person, property, or activity. It captures the probability that a loss will occur and the potential size of that loss, which is why it’s the term used in underwriting and policy pricing. Exposure refers to the item or person that could suffer a loss—the asset at risk—without by itself describing how likely the loss is. A peril is the actual cause of the loss, such as a fire or a storm. A hazard is a condition that increases the likelihood or severity of a loss, like slippery roads or faulty wiring. So when asked for the term describing the chance of loss, risk is the best fit.

Risk is the chance of loss to an insured person, property, or activity. It captures the probability that a loss will occur and the potential size of that loss, which is why it’s the term used in underwriting and policy pricing. Exposure refers to the item or person that could suffer a loss—the asset at risk—without by itself describing how likely the loss is. A peril is the actual cause of the loss, such as a fire or a storm. A hazard is a condition that increases the likelihood or severity of a loss, like slippery roads or faulty wiring. So when asked for the term describing the chance of loss, risk is the best fit.