Which concept describes susceptibility to loss?

• A. Peril
• B. Pure Risk
• C. Moral Hazard
• D. Exposure

Answer: (D)

Exposure describes susceptibility to loss. It’s the measure of how much could be lost given the insured’s situation—the value at risk, the number of exposure units (like lives or property), and where those assets are located. This makes exposure the best way to express how likely a loss could occur. Peril is the actual cause of loss (like fire or theft), which is a separate concept. Pure risk is the type of risk that involves the possibility of loss with no opportunity for gain, not the degree of susceptibility. Moral hazard refers to behavioral changes that increase risk when people are insured, not how likely a loss is. So the idea of being subject to potential loss—your exposure—fits the meaning of susceptibility to loss.