Life & Health Insurance Practice Exam 2026 - Free Practice Questions and Study Guide

The term that refers to the uncertainty regarding loss for an insured is "risk." In the context of insurance, risk encompasses the chance or probability of a loss occurring. It embodies the inherent uncertainties that individuals or organizations face, which insurers assess when determining policy terms, premiums, and coverage.

Understanding risk is fundamental to the insurance industry, as it guides the underwriting process. Insurers evaluate the level of risk presented by potential clients to set premiums that accurately reflect the potential for loss. The greater the risk, the higher the premium might be, as the insurer anticipates a higher likelihood of claims.

Hazard refers to a condition that increases the probability of a loss occurring but does not capture the broader context of uncertainty like risk does. Peril specifically denotes the cause of loss (e.g., fire, theft), and exposure relates to the extent or risk presented by existing circumstances or properties that could be affected by peril.

Thus, "risk" encapsulates the uncertainty regarding potential losses, making it the correct choice in this context.