Washington Life Producer Practice Exam

The cause of a loss is referred to as a(n)?

1. Peril

2. Hazard

3. Claim

4. Risk

The correct answer is: Peril

The term that refers to the cause of a loss is "peril." In the context of insurance and risk management, perils are events or situations that can lead to a loss, such as fire, theft, or natural disasters. Understanding perils is crucial because they define the specific risks that insurance policies are designed to cover. On the other hand, hazards are conditions or situations that increase the likelihood of a peril occurring, but they do not directly cause a loss. Claims are formal requests made by policyholders to insurance companies for compensation for losses. Risk refers to the uncertainty regarding financial loss, encompassing both perils and hazards, but it does not specify the cause itself. Overall, identifying perils helps in understanding insurance coverage and the nature of risks that need to be managed within a policy.