The correct answer is C) when the rate of heat loss of the body exceeds the rate of heat production. Hypothermia occurs when the body loses heat faster than it can produce it, causing the core body temperature to drop. This leads to a dangerous decline in bodily functions. The other options are incorrect - option A describes normal body temperature, option B describes heat balance, and option D is too broad, as hypothermia can occur in various situations, not just when a person is immersed in water.