How is a "hazard" defined in an insurance context?

In an insurance context, a "hazard" is defined as a factor or condition that increases the likelihood of a loss occurring. This definition is crucial as it distinguishes hazards from mere risks. While risk pertains to the chance of a loss happening, a hazard specifically refers to the underlying causes or situations that can elevate those chances.

For example, installing a faulty electrical system in a building represents a hazard because it heightens the risk of fire damage. Understanding hazards allows insurers to better assess their potential exposure and correctly evaluate premiums and policy terms based on the increased risk associated with various hazards.

Other concepts like the potential for injury or financial risk, while relevant to the broader understanding of insurance, do not specifically capture the meaning of a hazard as it pertains to the increased possibility of loss. This focused approach is essential in risk assessment and management within the insurance industry.