Question 1 of 20
How would you distinguish risk, peril, and hazard when explaining why an exposure can be insurable even though no loss has occurred?
Strong Interview Answer
Risk is the uncertainty or possibility of loss. A peril is the event that causes loss, and a hazard is a condition that increases the likelihood or severity of loss. Insurance deals with uncertain fortuitous losses, not losses that are certain to occur.
What to Listen For
- risk = uncertainty or possibility of loss
- peril = cause of loss
- hazard = condition increasing frequency or severity
- fortuitous rather than certain loss
Caution
Do not collapse risk, peril, and hazard into interchangeable terms.