Which of the following can be defined as a cause of a loss?

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

Answer: (A)

Peril is the event or condition that causes a loss to occur. In insurance terms, a peril is the direct cause of damage or financial loss, such as fire, theft, or a windstorm. A hazard is a condition that increases the likelihood of a peril occurring or the severity of the loss, not the actual cause itself. Risk refers to the probability and potential magnitude of loss, not the specific event that causes it. Adversity isn’t a standard technical term for the cause of loss in policy language. So peril best fits the definition.