Which term indicates the chance of loss that is overly financially burdensome?

The correct term indicating the chance of loss that is overly financially burdensome is adverse selection. Adverse selection occurs when there's an imbalance in information between the insurer and the insured, leading to a situation where individuals at higher risk are more likely to purchase insurance. This can ultimately result in the insurer facing greater losses than anticipated, as they attract a disproportionate number of high-risk policyholders. This phenomenon can burden the insurance company financially if not managed correctly, as it leads to higher claims than what is balanced by premiums.

In contrast, insurable risk refers to risks that can realistically be covered by insurance, where the insured will not face overwhelming financial consequences. A hazard pertains to a condition or situation that increases the likelihood of a loss occurring but doesn’t necessarily define financial burden alone. Proximate cause relates to the direct cause of a loss in an insurance context and is important for determining coverage but does not address the financial burdens imposed by adverse selection.