IIAP Ordinary Life (OL) Practice Exam 2025 – Comprehensive All-in-One Guide to Exam Success!

In the context of insurance, risk refers to the uncertainty regarding financial loss and the factors that could lead to a claim being made. Option B, which relates to the hazard on people's lives, captures this concept accurately. It reflects the idea that insurance operates by assessing the potential dangers or hazards that individuals face in their lives, such as sickness, accidents, or death, which can result in claims.

Insurance companies evaluate these risks to determine premiums and coverage options, as they seek to balance the possibility of clients making claims against the income generated from their premiums. Therefore, understanding risk as it pertains to hazards impacting people's lives is fundamental in determining both the insurance policy structure and the potential financial implications for both the insured and the insurer.

The other choices do not capture this essential notion of risk in insurance. While they mention payouts, they do not reflect the broader understanding of risk associated with life and health conditions.