Which term describes the cause of a loss?

Which term describes the cause of a loss?

• A. Hazard
• B. Peril
• C. Risk
• D. Loss

Answer: (B)

The cause of a loss is called a peril. A peril is the event or circumstance that leads to damage or loss, such as fire, windstorm, theft, or flood. Hazards are conditions that increase the likelihood or severity of a loss (for example, a slippery floor makes a fall more likely). Risk refers to the probability and potential cost of a loss occurring, not the specific event that causes it. Loss is the actual damage or financial payment that results after the peril occurs. In insurance, policies specify which perils are covered, clarifying which events the insurer will respond to.

The cause of a loss is called a peril. A peril is the event or circumstance that leads to damage or loss, such as fire, windstorm, theft, or flood. Hazards are conditions that increase the likelihood or severity of a loss (for example, a slippery floor makes a fall more likely). Risk refers to the probability and potential cost of a loss occurring, not the specific event that causes it. Loss is the actual damage or financial payment that results after the peril occurs. In insurance, policies specify which perils are covered, clarifying which events the insurer will respond to.