In the insurance industry, risk, peril, and hazard are three different but related terms

that describe the possibility and cause of a loss. Here is a brief explanation of each
term and some examples:
• Risk is the potential for a loss. It is the uncertainty arising from the possible
occurrence of given events that would result in loss with no opportunity for
gain. For example, the risk of a car accident is the possibility that you might
get into a collision and suffer damage or injury.
Risk is the potential for a loss. For example, the risk of a house fire is the
possibility that your house might catch fire and suffer damage.
• Peril is the cause of a loss. It is the direct source of the loss or the event that
triggers the loss. For example, the peril of a car accident is the collision itself,
which damages your car and injures you.
Peril is the cause of a loss. For example, the peril of a house fire is the fire
itself, which damages your house and its contents.
• Hazard is something that increases the probability or severity of a loss. It is a
condition, situation, or behavior that makes a peril more likely to occur or a
loss more likely to be suffered. For example, a hazard of a car accident is
driving under the influence of alcohol, which impairs your judgment and
reaction time.
Hazard is something that increases the probability or severity of a loss. For
example, a hazard of a house fire is storing flammable materials near a heat
source, which makes the fire more likely to start or spread.
To summarize: hazards increase the risk of a specific peril. You can think of the
relationship between risk, peril, and hazard like this:
• A risk is the potential for a loss;
• A peril is the cause of a loss;
• A hazard is something that increases the likelihood or severity of a loss.