New York State Property and Casualty Licensing Practice Exam 2025 – Your All-in-One Guide to Success!

The term that refers to the reduction, decrease, or disappearance of value of the person or property insured in a policy caused by a named peril is "Loss." In insurance terminology, a loss denotes the financial impact or impairment that occurs as a result of a covered event or peril. This is a fundamental concept in understanding how insurance operates, as policies are designed to provide compensation for losses that are specifically outlined.

While the other terms presented have their own meanings in the context of insurance, they do not correctly encapsulate the idea of value reduction due to a peril. "Exposure" relates to the risk associated with property or liability that could potentially lead to a loss, but it does not imply the actual occurrence of that loss. A "Claim" represents a request for payment from the insurance company following a loss, but it does not define the loss itself. "Damage," on the other hand, often refers specifically to physical harm or destruction of property, but it does not necessarily indicate the overall financial reduction in value that is captured by the term "Loss." Thus, "Loss" is accurately used to describe the financial outcome resulting from a risk materializing as outlined in the insurance policy.