What is defined as a physical hazard in insurance?

A physical hazard in insurance is identified as a condition that creates a higher risk of loss. These hazards are tangible, observable factors that increase the likelihood of a loss occurring. For example, a wet floor in a store or a dilapidated structure could serve as physical hazards that heighten the risk of an accident or damage.

The focus on this definition emphasizes that physical hazards are based on the actual physical characteristics of a location or item that can lead to an increased chance of an insurance claim being filed. Understanding these hazards is crucial for insurers when assessing risk and determining premiums, as they provide insight into the safety and security of insurable risks.

The other options do not accurately define physical hazards: legal obligations relate to liability aspects, financial decisions pertain to the handling of insurance coverage rather than hazards themselves, and types of insurance policies describe the various forms available rather than conditions that contribute to risk.