Exposure is a unit of measurement that measures the amount of risk. The more a person does—or the more a person has—the more risk he or she has. For example:
- Terry drives her car 15,000 miles each year. Kim drives his car 50,000 miles each year. Since Kim drives more miles, he has a higher chance of being in an accident—he has more exposure.
- Kenny owns a $300,000 home, and Cindy owns a $1,000,000 home. Considering the possibility of their homes being destroyed by fire, Cindy has more property that could be lost—she has more exposure.
- Marvin drinks 72 ounces of energy drinks each day, while Jorge only drinks 12 ounces each day. Marvin has more exposure to health problems.
Peril means the cause of loss. Some examples:
- Regarding property and casualty insurance, examples of perils are: wind, fire, explosion, and car accidents.
- Regarding life and health insurance, examples of perils are: sickness and injury.