Page 298 - Ebook health insurance IC27

The Insurance Times

Under the law of large numbers, the number of individuals seeking protection must be
large enough to allow the insurer to predict the incidence of losses and the associated
expenses.

Peril and hazard

Peril
Peril is defined as the cause of loss. In medical insurance, it would be any sickness or
disease that is expected to result in a loss. If a person has an underlying infection, for
example, Tuberculosis (TB) in his body, he would have a raise in his body temperature
(otherwise described as fever).

In this case, TB is the peril, or cause of loss. Other examples of perils in medical insurance
could be fracture, eye diseases, appendicitis, ulcers, or any other condition that require
treatment.

Hazard
A hazard is a condition, which may lead to a loss. For example, obesity may lead to
hypertension, diabetics, high cholesterol in blood, heart problems, etc. The following
are different types of hazards:

Physical Hazard
The danger of loss arising from the condition, as opposed to such danger arising from
the character of the insured. Examples of physical hazards in medical insurance include
contaminated living condition or environment that increases the chance of infectious

302 Guide for Health Insurance