California Life-Only & Accident and Health AgentGeneral InsuranceEasy
A life insurance policy states that the insurer will pay a death benefit upon the death of the insured. The death of the insured is considered a(n):
- AExposure
- BRisk
- CPeril
- DHazard
Show answer & explanationAnswer & explanation
Correct answer: C. Peril
A peril is the actual cause of a loss. In a life insurance policy, death is the event that triggers the payment of the death benefit, making it the peril.
Why the other options are wrong
- A. Exposure refers to the state of being subject to a possible loss.
- B. Risk is the uncertainty or chance of a loss occurring.
- D. A hazard is a condition that increases the probability or severity of a loss.
Peril
A peril is the actual cause of a loss in insurance. It is the event that an insurance policy is designed to protect against.
- The direct cause of a loss.
- Examples include fire, theft, death, illness.
- Distinct from hazards, which increase the likelihood of perils.
Memory trick: Remember 'PRH': Peril is the cause, Risk is the chance, Hazard increases it.