A tornado that destroys a property would be an example of what?

A tornado that destroys a property would be an example of what?

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

Answer: (A)

In insurance terms, the specific event that can cause a payment under a policy is called a peril. A tornado is the peril because it’s the actual event that causes the damage to the property. Hazards are conditions that increase the likelihood or severity of a loss (like a bad roof, dry surroundings, or faulty wiring). Risk blends the likelihood of a loss with the amount at stake, taking into account exposure and hazards. Loss is the actual financial damage that results once the peril occurs. So a tornado that destroys a property is the peril—the event that leads to the loss.

In insurance terms, the specific event that can cause a payment under a policy is called a peril. A tornado is the peril because it’s the actual event that causes the damage to the property. Hazards are conditions that increase the likelihood or severity of a loss (like a bad roof, dry surroundings, or faulty wiring). Risk blends the likelihood of a loss with the amount at stake, taking into account exposure and hazards. Loss is the actual financial damage that results once the peril occurs. So a tornado that destroys a property is the peril—the event that leads to the loss.