General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An applicant for individual disability insurance regularly skydives and smokes. For underwriting purposes, these activities are best classified as:
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Skydiving and smoking are conditions that increase the likelihood that the applicant will suffer an injury or illness, so they are hazards, specifically physical hazards. Underwriters weigh such hazards in classifying the risk and setting the premium. A peril is the event that causes the loss, such as the crash or the resulting illness; an insurable event defined by the insurance code is the event whose occurrence triggers the insurer's liability; and no financial loss has occurred yet in this example, because these are forward-looking risk factors.
Why the other options are wrong
- A) Perils are the causes of loss themselves, such as an accident, not the activities that make a loss more likely.
- B) An insurable event defined by the insurance code is the event that determines the insurer's liability, not an activity that increases risk.
- D) The applicant has not yet suffered a loss; these activities are forward-looking risk factors used in classification.
Memory hook
Hazards load the dice; perils roll them across the table.