General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
In insurance terminology, 'risk' is most accurately defined as:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Risk is the uncertainty or chance of loss — the possibility that an event will occur and produce a financial loss. It is not the loss itself, which is the realized outcome, nor the premium, which is the price of transferring the risk. In insurance, risk must involve uncertainty: if a loss is certain, there is nothing to insure. This definition underlies every aspect of underwriting and ratemaking.
Why the other options are wrong
- B) The actual loss is the outcome of the risk materializing; risk exists before and independent of any particular loss.
- C) A deliberate act causing damage is not an insurable risk because it lacks fortuitousness; it may be a crime, not a risk.
- D) The premium is the amount paid to transfer risk; it measures the risk but is not the risk itself.
Memory hook
Risk = the maybe. Not the bill, not the damage — just the uncertainty that the damage might happen.