Which statement correctly differentiates peril and hazard?

Which statement correctly differentiates peril and hazard?

• A. Hazard is the direct cause of loss; peril is a condition that increases risk
• B. Peril is the direct cause of loss; hazard is a condition that increases risk
• C. Peril and hazard are the same
• D. Hazard is always excluded from coverage

Answer: (B)

The main idea is to distinguish what causes a loss from what makes loss more likely. A peril is the actual event that causes the loss (the direct cause). A hazard is a condition or situation that increases the likelihood that a loss will occur or that the loss will be more severe. For example, a fire that damages property is the peril—the event that results in the loss. A hazard would be the condition that makes fire more likely or worse, such as exposed electrical wiring, oily rags stored in a hot area, or blocked exits that hinder quick response. Hazards don’t by themselves create the loss; they raise the risk that a loss will happen or be greater when a peril occurs. That’s why the statement that peril is the direct cause of loss and hazard is a condition that increases risk is the best fit. The other options either reverse the definitions, claim they’re the same, or state something false about hazards being excluded from coverage.

The main idea is to distinguish what causes a loss from what makes loss more likely. A peril is the actual event that causes the loss (the direct cause). A hazard is a condition or situation that increases the likelihood that a loss will occur or that the loss will be more severe.

For example, a fire that damages property is the peril—the event that results in the loss. A hazard would be the condition that makes fire more likely or worse, such as exposed electrical wiring, oily rags stored in a hot area, or blocked exits that hinder quick response. Hazards don’t by themselves create the loss; they raise the risk that a loss will happen or be greater when a peril occurs.

That’s why the statement that peril is the direct cause of loss and hazard is a condition that increases risk is the best fit. The other options either reverse the definitions, claim they’re the same, or state something false about hazards being excluded from coverage.