Certified Financial Consultant (CFC) Practice Exam

Events or conditions that increase the chances of an insured loss occurring are referred to as:

1. Risks

2. Perils

3. Hazards

4. Liabilities

The correct answer is: Hazards

The term that accurately describes events or conditions that increase the chances of an insured loss occurring is "hazards." Hazards are factors that can increase the likelihood of a peril leading to a loss. They can be categorized into different types, such as physical hazards (e.g., icy roads), moral hazards (e.g., dishonest behavior), and legal hazards (e.g., changes in regulations). Understanding hazards is crucial for risk management and insurance underwriting, as it helps insurers assess the level of risk associated with different situations. By identifying and evaluating hazards, insurers can implement strategies to mitigate risks, adjust premiums, and develop coverage that adequately addresses potential losses. In contrast, risks refer more broadly to the possibility of loss or injury; perils are the specific causes of loss (like fire or theft), and liabilities refer to the legal responsibilities one may have for causing harm or damage to others. Thus, hazards specifically address conditions that contribute to the likelihood of these risks or perils materializing into actual losses.