A heavy smoker has a significantly higher chance of developing lung disease than a nonsmoker. In insurance terms, the smoking habit is best described as a:

Why A is correct

A hazard is any condition that increases the likelihood or severity of a loss. Smoking is a physical hazard: it is a tangible, measurable condition that raises the probability of the peril (lung disease) occurring. Hazards do not cause the loss directly; they increase the odds that the peril will strike. Underwriters evaluate physical hazards such as tobacco use, obesity, and hazardous occupations when classifying a risk and setting the premium.

Why the other options are wrong

• B) The peril is the cause of loss — the lung disease itself; smoking merely increases the chance it will occur.
• C) Smoking involves no chance of gain; it is a pure-risk context, and the hazard concept is unrelated to speculative risk.
• D) Smoking is a condition existing before the loss; it is not a loss that has already been suffered.

Memory hook

Cigarettes don't strike the loss; they load the dice so disease comes up more often.