Which term describes the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril?

Which term describes the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril?

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

Answer: (C)

The key idea is the actual decrease in value that happens to insured property when a covered event occurs. That real-world decrease is called a loss. It’s the financial impact realized by the policyholder, the amount by which value is reduced or erased by the peril. Risk refers to the chance a loss could happen, hazard is a condition that makes loss more likely, and peril is the specific event that causes the loss. So the term that describes the reduction in value caused by a named peril is loss.

The key idea is the actual decrease in value that happens to insured property when a covered event occurs. That real-world decrease is called a loss. It’s the financial impact realized by the policyholder, the amount by which value is reduced or erased by the peril. Risk refers to the chance a loss could happen, hazard is a condition that makes loss more likely, and peril is the specific event that causes the loss. So the term that describes the reduction in value caused by a named peril is loss.