What does 'risk' mean in the context of insurance?

In the context of insurance, 'risk' refers to the exposure to the possibility of financial loss or harm that an insurer covers. Understanding this term is crucial because it encapsulates the uncertainty that insurance companies need to manage when underwriting policies.

When assessing risk, insurers evaluate numerous factors, including the potential hazards affecting people's lives, which can include health risks, accidents, or property damage. These hazards can lead to claims that the insurance company must pay out, making them central to the insurance industry's operations. Hence, referring to 'hazard on people's lives' is accurately capturing the essence of what constitutes risk in insurance.

Other options touch on different aspects of insurance but do not encapsulate the fundamental idea of risk as it pertains to potential hazards and losses. The chances of being declined by the company and the chances of beneficiaries being paid are related to the administrative and payout processes of insurance but do not define risk itself in this context.