Which of the following terms describes events that increase the chances of loss for an insured?

The correct choice is based on the concept of hazards within the context of insurance. A hazard refers to a condition or situation that increases the likelihood of a peril occurring, thereby raising the chances of loss for an insured individual or entity. Hazards can be classified into different types: physical, moral, or morale, each contributing to the potential for loss.

Understanding this definition is crucial because it clarifies how hazards relate to risk management. For instance, if a property is in a flood-prone area (a physical hazard), the chance of a loss due to flooding (the peril) is elevated. Insurance policies consider these hazards in underwriting and pricing decisions.

The other terms mentioned relate to different concepts in insurance. A peril specifically refers to the actual cause of loss (like fire or theft). Risk transfer involves shifting the potential financial consequences of a loss from one party to another, typically through insurance. Retention is the practice of accepting the financial responsibility for certain risks rather than transferring that risk to an insurer. Understanding the distinction among these terms is essential for anyone studying insurance principles.