General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A condition or circumstance that increases the likelihood or severity of a loss is called a:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A hazard is any condition or circumstance that increases the chance or severity of a loss. Hazards may be physical (tangible conditions), moral (dishonesty), or morale (carelessness). A peril is the actual cause of the loss; the hazard merely makes the peril more likely or its consequences worse. Identifying hazards is central to underwriting because they directly affect the probability of claims.
Why the other options are wrong
- B) A peril is the cause of the loss itself — fire, accident, illness — not the condition that increases its likelihood.
- C) A loss exposure is a situation presenting the possibility of a loss; a hazard is one of the conditions within that situation that raises the odds.
- D) A consequential loss is an indirect loss flowing from a direct loss, not a condition affecting the chance of loss.
Memory hook
Hazard = the factor that fans the flames. Peril = the flame itself.