Which statement correctly describes the relationship between risk, hazard, and peril?

The selected statement accurately defines the concepts of risk, hazard, and peril in the context of insurance and risk management. Risk is understood as the chance of loss occurring. It encapsulates the uncertainty surrounding potential negative events. On the other hand, a hazard is something that increases the likelihood of that loss occurring; it represents the conditions or factors that can elevate the risk. For instance, icy roads are a hazard that increases the risk of a car accident. Lastly, peril refers to the actual cause of loss or damage, such as fire, theft, or flooding. This definition reflects how these terms are interconnected in risk assessments and insurance underwriting, clarifying their distinct but related roles in the process of managing potential losses.