The chance of financial loss is known as?

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

Answer: (A)

Risk is the probability or chance that a financial loss will occur. In insurance terms, it captures the uncertainty about whether a loss will happen and how large it might be. For example, a property in a hurricane-prone area has higher risk because the likelihood of a claim due to wind or flood damage is greater. A hazard is a condition that makes loss more likely, such as a loose roof that increases wind damage potential. Exposure refers to the assets at risk—the property, people, or data that could suffer loss if a peril occurs. Loss is the actual amount of financial damage that results. So the term that describes the chance of financial loss is risk.