Registered Insurance Brokers of Ontario (RIBO) Practice Exam

In an insurance context, what is a hazard?

1. A cause of loss

2. A factor that increases the likelihood of a loss

3. A type of insurance coverage

4. A legal obligation under insurance law

The correct answer is: A factor that increases the likelihood of a loss

In the context of insurance, a hazard is a factor that increases the likelihood of a loss occurring. This term encompasses anything that could potentially enhance the probability of a peril, such as unsafe conditions, actions, or characteristics of property. For example, a slick road can be considered a hazard because it increases the chance of a vehicle accident. Understanding hazards is crucial in determining risk and setting appropriate insurance premiums, as higher hazards typically lead to increased likelihood of claims. This helps insurancers assess how to manage or mitigate risks associated with coverage.