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Physical Hazard

Updated on October 4, 2023

The term hazard is a vital component of an insurance contract to highlight the possibility of a claim. The meaning of this term and its relevance in insurance contracts is given here.

What is meant by Physical Hazard?

A “physical hazard” refers to a specific type of risk that is associated with tangible or material aspects of the insured property or individual. These hazards are essential considerations for insurance companies when they assess and underwrite policies.

What are the different types of physical hazards and examples of the same?

Physical hazards are conditions directly linked to the physical characteristics of insured property, objects, or individuals, increasing the risk of harm or damage, a major concern for insurers. These hazards fall into three main categories:

Location-Related Hazards – These stem from the geographical position of the insured property, such as flood-prone areas susceptible to water damage.

Structural Hazards – These concern the construction and upkeep of the insured property, like a poorly maintained building with a damaged roof leading to potential water leaks.

Occupancy-Based Hazards – These arise from how a property is used or occupied, such as factories storing flammable materials posing a fire risk.

Examples of Physical Hazards

Fire Risk – Properties with inadequate fire safety, faulty wiring, or close proximity to other structures have a higher risk of fire damage.

Flood Risk – Locations prone to flooding, especially during monsoon seasons, face physical hazards related to floods.

Earthquake Risk – In regions with seismic activity, structures may encounter physical hazards due to earthquakes.

Industrial Hazards – Industrial facilities handling hazardous materials or processes are exposed to physical hazards like explosions, chemical spills, or accidents.