What is a physical hazard in insurance terms?

A physical hazard in insurance terms refers to a condition or situation that can increase the likelihood or severity of a loss. This includes tangible elements such as environmental factors, geographical features, or even characteristics of the property itself that could contribute to damage or injury. For example, a poorly maintained roof or a location prone to flooding are considered physical hazards because they create a higher risk of substantial loss, whether property damage or personal injury.

Understanding physical hazards is essential for insurance producers as they assess risk and determine appropriate coverage options. By identifying such hazards, insurers can better evaluate the level of risk associated with a property and adjust premiums accordingly. This highlights the importance of thorough risk assessment in the underwriting process, ensuring that both insurers and policyholders are adequately protected.