What term refers to the uncertainty of future outcomes in insurance?

The term that refers to the uncertainty of future outcomes in insurance is risk. In an insurance context, risk represents the potential for loss or gain, with a focus on the likelihood of adverse events occurring. Insurers assess risk to determine premiums, coverage limits, and policy conditions, as it directly impacts their potential liability and financial exposure.

Understanding risk is fundamental in insurance because it informs not only underwriting and pricing decisions but also the strategies insurers use to mitigate potential losses. By effectively evaluating and managing risk, insurers can set policies that adequately cover the uncertainties inherent in various situations, whether these involve property, life, or health.

Other terms in the options have distinct meanings within an insurance framework. Liability refers to the legal responsibility to compensate someone for harm or loss, exposure relates to the state of being subject to a risk of loss, and indemnity is the principle of restoring an insured party to its pre-loss condition. While they all connect to the broader topic of risk management in insurance, only risk specifically embodies the concept of uncertainty in potential outcomes.