What increases the probability or severity of loss due to a peril?

The correct choice, hazard, refers to a condition or situation that increases the probability or severity of a loss occurring from a specific peril. Hazards can be categorized into different types, such as physical hazards (which involve tangible conditions), moral hazards (which involve the behavior of individuals that may affect the likelihood of a loss), and morale hazards (which refer to carelessness resulting from the existence of insurance).

For example, if a building has an old, frayed electrical system, this physical hazard increases the risk of a fire, thus heightening the potential for loss. In contrast, while risk refers to the uncertainty of loss, and liability pertains to legal obligations, they do not specifically address the conditions that elevate the likelihood or impact of a loss. An incident typically describes an event that occurs but does not inherently suggest an ongoing condition that influences loss potential. Therefore, hazard accurately captures the idea of a contributing factor that amplifies the chances or consequences of a loss resulting from a peril.