General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
In insurance terminology, 'risk' is best understood 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 unplanned event will cause financial loss. Insurers pool and predict risk across large groups even though no one knows which individuals will suffer losses. Risk is distinct from peril (the cause of loss), hazard (a condition increasing loss likelihood), and premium (the price paid for coverage).
Why the other options are wrong
- B) The event that causes the loss is the peril.
- C) A condition that increases the chance of loss is a hazard.
- D) The premium is the price of transferring risk, not risk itself.
Memory hook
Risk = chance. Peril = cause. Hazard = amplifier. Premium = price.