General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An actuary calculates that a 40-year-old applicant has a 0.3 percent chance of becoming disabled within the next year. This figure is a measure of the applicant's:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The chance that a loss will occur is the definition of risk, and expressing it as a percentage quantifies that risk. Insurers use morbidity tables and similar data to measure the probability of illness or disability within a population group. This measured probability is what the law of large numbers makes predictable and what premium rates are built upon.
Why the other options are wrong
- B) A morbidity hazard is a condition that increases the chance of sickness, not the measured probability itself.
- C) A peril is the cause of loss, such as an accident or disease, not its probability.
- D) The elimination period is a waiting time before disability benefits begin, unrelated to probability.
Memory hook
Risk wears numbers: a 0.3 percent chance is risk quantified, the raw material of premium math.