Which statement correctly distinguishes peril from hazard?

• A. Peril is a condition that increases loss likelihood.
• B. Peril is the actual cause of loss; hazard is a condition that increases loss likelihood.
• C. Hazard is the actual cause of loss.
• D. Peril and hazard are the same.

Answer: (B)

Peril versus hazard: a peril is the actual cause of a loss, while a hazard is a condition that increases the likelihood or severity of a loss. For example, fire is a peril because it directly causes fire-related losses. A wet floor is a hazard because it makes a loss (a fall or injury) more likely, or can make the consequences of a peril more severe. This distinction is exactly captured by describing peril as the actual cause of loss and hazard as a condition that raises the chance of a loss occurring. The other ideas would blur these roles or treat them as the same, which isn’t accurate.