General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
In insurance terminology, 'risk' is best 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 A is correct
Risk in insurance is the uncertainty concerning whether a loss will occur — the chance of loss. It is the element the insurer evaluates and prices. The actual cause of loss is a peril, a condition increasing loss is a hazard, and the amount paid is the claim or benefit. Keeping these definitions separate is essential for understanding how risks are classified and underwritten.
Why the other options are wrong
- B) The actual event that causes a loss is a peril, not risk itself.
- C) A condition that increases the likelihood or severity of loss is a hazard.
- D) The amount paid on a claim is the loss payment or benefit, not the risk.
Memory hook
Risk is the 'what if'; peril is the 'what happened'; hazard is the 'what made it worse'.