Hazard

Peril — fire; hazard — the dry field and wooden shed — The peril is the actual cause of loss — the fire that destroyed the shed. The hazard is the condition that increased the chance of fire — the dry field and the wooden shed. Hazards may be physical (tangible conditions), moral (dishonesty), or morale (carelessness bred by the existence of coverage). Correctly separating peril from hazard is essential to risk classification and loss-prevention analysis.

National insurance concept

A condition that increases the probability that a loss will occur — A hazard is a condition, circumstance, or factor that increases the probability or severity of a loss. Hazards are classified as physical, moral, or morale: a physical hazard is a tangible condition such as defective wiring, a moral hazard is dishonesty such as deliberately causing a loss, and a morale hazard is carelessness that arises because insurance exists. Underwriters evaluate hazards carefully because they directly affect the likelihood of a claim and therefore the premium that must be charged for the risk being considered.

National insurance concept