General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
In insurance terminology, "risk" is most accurately defined as:
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Risk is the uncertainty regarding financial loss. It is not the loss itself, not the cause of a loss (that is a peril), and not a condition that increases the chance of loss (that is a hazard). Insurance works by transferring risk from the individual to a group: the law of large numbers lets the insurer predict group losses with reasonable accuracy even though each individual outcome remains uncertain. Understanding this distinction is foundational to classification, rating, and underwriting.
Why the other options are wrong
- A) The event that causes a loss is a peril; risk is the uncertainty about whether that event will occur.
- B) A condition that increases the chance of loss is a hazard, which is distinct from risk itself.
- D) An intentional, certain act is neither fortuitous nor insurable; risk presumes uncertainty about an accidental loss.
Memory hook
Risk = uncertainty about loss. Not the fire (peril), not the wiring (hazard).