Which of the following are factors that work together to causes losses?

• A. Perils
• B. Hazards
• C. Both Perils and Hazards
• D. None

Answer: (C)

The main idea here is that losses arise from the combination of a peril and a hazard. A peril is the actual event that causes damage or loss (for example, a crash, a fire, or a collision). A hazard is a condition that makes that peril more likely to occur or more severe if it does (think pilot fatigue, poor maintenance, equipment failure due to wear, or adverse weather).

Losses don’t happen just because a hazard exists; they happen when the peril occurs while that hazardous condition is present, or is intensified by it. Conversely, a peril might occur but, without the hazard, the probability or impact of a loss is lower. Therefore, both factors work together to produce losses, making the best choice the one that includes both perils and hazards.