Life & Health Insurance Practice Exam 2026 – Your All-in-One Guide to Exam Success!

The term that describes an unintentional decrease in the value of an asset resulting from a peril is "loss." This is a fundamental concept in insurance, as losses are the events or situations that cause a decrease in the value of property or an item insured due to risks or perils.

When a peril occurs—such as fire, theft, or natural disaster—any resulting decline in the asset’s value is categorized as a loss. It can involve tangible items such as buildings or personal property being damaged or destroyed, as well as intangible assets like business goodwill. Understanding this definition is crucial for grasping how insurance protects against financial impact from such losses.

The other terms mentioned have distinct meanings in the context of insurance and finance. Depreciation refers to the gradual reduction in value of an asset over time due to wear and tear or obsolescence, but it does not necessarily relate to an event or peril. Liability involves legal responsibility for causing harm or damage to another party, and hazard refers to a condition that increases the likelihood of a loss occurring. However, none of these concepts directly capture the idea of an unintentional decline in asset value resulting specifically from a peril.