Which factor can increase the probability of an insured loss?

Hazards are factors that can increase the likelihood of an insured loss occurring. In the context of insurance, hazards are conditions or situations that can make a peril more likely to happen or more severe in nature. For example, an individual living in a flood-prone area may have increased exposure to the risk of flood-related damages. These hazards can be classified into three types: physical, moral, and morale hazards. Physical hazards refer to the characteristics of the environment that increase risk, such as poor construction of buildings in vulnerable areas. Moral hazards involve behaviors that increase risk due to a change in the insured's behavior once they are protected by insurance. Morale hazards arise from carelessness or a lack of concern for loss due to the existence of insurance coverage.

In contrast, perils are the specific risks or causes of loss covered by an insurance policy, like fire or theft, but they do not, in themselves, increase loss probability. Premiums are the cost of insurance coverage, and policies are the agreements or contracts that define the coverage provided. While premiums are influenced by risk analysis, and policies determine coverage, neither directly affects the probability of losses occurring.