General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
In insurance terminology, a hazard is best defined as:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
A hazard is any condition, circumstance, or situation that increases the probability that a loss will occur. Hazards fall into three recognized categories: physical hazards, which are tangible conditions; moral hazards, which involve dishonesty or fraud; and morale hazards, which involve carelessness or indifference. Hazards are distinct from perils, which are the actual causes of loss, and from losses, which are the financial consequences of perils. Identifying hazards is central to underwriting and risk classification.
Why the other options are wrong
- A) The actual cause of a loss is a peril, such as fire, illness, or an accident, not a hazard.
- C) The dollar amount of a loss is simply the loss, not a condition that increases the chance of it happening.
- D) The individual covered by the policy is the insured, who is a party to the contract, not a hazard.
Memory hook
Hazards are risk-boosters; they are not the event itself.