A “hazard rate” looks at how likely someone or something is to survive until a certain age. That might sound a little macabre, but it can be totally useful if we’re trying to predict how long something like a major piece of equipment is going to last.
Like...let’s say we just spent $10,000 on a super-fancy new AC unit for our house with the expectation that it will last for 10 years. To figure out the unit’s hazard rate—in this example, how likely it is to last the full ten years—we basically divide one year by the number of years we think it has left. So when it’s brand new, its hazard rate is 1/10, or .10. Next year, its hazard rate will be 1/9, or .11. In five years, it’ll be 1/5, or .20.
Really, what we’re saying is, “if the AC unit survives to be five years old, this is the likelihood it will also survive to be ten years old.”
Hazard rates are handy for all sorts of things: calculating the likelihood of someone defaulting on a loan, for example, or calculating when a dam will fail, or determining the life expectancy for someone born in a certain kind of environment. But it’s important to note that hazard rates don’t apply to things that can be repaired; if we can fix our AC unit or repair the dam, that’s likely going to impact how long the thing survives, which makes our hazard rate calculations less useful.