Which term best describes a state that increases the chance or impact of a loss from a peril?

Which term best describes a state that increases the chance or impact of a loss from a peril?

• A. Hazard
• B. Exposure
• C. Incident
• D. Loss

Answer: (A)

A hazard is a condition that increases either the likelihood of a loss or the severity of a loss from a peril. In the example of a slippery floor, the wet surface creates a higher chance of someone slipping and getting injured, and the injury could be more severe because the floor is slick. Exposure refers to the assets or people that could be affected by a peril, but it doesn’t by itself raise the probability of a loss—the amount or value at risk. An incident is the actual event that occurs (such as the slip), and a loss is the resulting damage or cost after that event. So the state described fits hazard because it directly raises the probability and/or impact of a loss from the peril.

A hazard is a condition that increases either the likelihood of a loss or the severity of a loss from a peril. In the example of a slippery floor, the wet surface creates a higher chance of someone slipping and getting injured, and the injury could be more severe because the floor is slick. Exposure refers to the assets or people that could be affected by a peril, but it doesn’t by itself raise the probability of a loss—the amount or value at risk. An incident is the actual event that occurs (such as the slip), and a loss is the resulting damage or cost after that event. So the state described fits hazard because it directly raises the probability and/or impact of a loss from the peril.