General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Which statement correctly describes a hazard in the context of health insurance risk classification?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A hazard is a condition or circumstance that increases the chance of a loss occurring or increases the severity of a loss if one occurs. For example, smoking, obesity, or a hazardous occupation increases the likelihood of illness or disability. Underwriters identify hazards to classify applicants and set premiums. The hazard itself does not cause the loss — that is the peril's role — but it makes the loss more probable or more costly.
Why the other options are wrong
- B) The event that actually causes the loss is a peril (for example, the accident or the sickness), not a hazard.
- C) The financial consequence of a loss is the loss itself — the dollar damage — not a hazard.
- D) The number of similar exposures relates to the law of large numbers and loss prediction, not to the definition of a hazard.
Memory hook
Peril triggers the loss; hazard loads the dice. Hazards raise the odds or the bill.