Peril
A peril is the specific cause of loss that an insurance policy covers, such as fire, theft, windstorm, lightning, or vandalism. Insurance policies are structured around either named perils (specific listed events) or open perils (all events except exclusions).
Exam Tip
Peril = CAUSE of loss (fire, theft). Hazard = CONDITION increasing risk (faulty wiring). Moral hazard = dishonesty. Morale hazard = carelessness. Named perils require insured to prove; open perils require insurer to prove exclusion.
What is a Peril in Insurance?
A peril is the actual event or cause that results in damage or loss to insured property. Common perils include fire, lightning, windstorm, hail, theft, vandalism, and explosion. Insurance companies use perils to define exactly what risks they will and will not cover under a policy.
Peril vs. Hazard
| Term | Definition | Example |
|---|---|---|
| Peril | The cause of loss | Fire, theft, windstorm |
| Hazard | Condition that increases likelihood of peril | Faulty wiring, unlocked doors |
Types of Hazards
| Hazard Type | Description | Example |
|---|---|---|
| Physical Hazard | Tangible condition increasing risk | Old roof, poor plumbing |
| Moral Hazard | Dishonesty or character issues | Insurance fraud, arson for profit |
| Morale Hazard | Carelessness due to having insurance | Leaving doors unlocked |
Named Perils vs. Open Perils Policies
| Policy Type | Coverage Approach | Burden of Proof |
|---|---|---|
| Named Perils | Only covers perils specifically listed in policy | Insured must prove loss was from a named peril |
| Open Perils (All-Risk) | Covers all perils EXCEPT those specifically excluded | Insurer must prove exclusion applies |
Common Covered Perils (HO-3 Policy)
| Peril Category | Examples |
|---|---|
| Fire & Lightning | Accidental fires, lightning strikes |
| Windstorm & Hail | Hurricane, tornado, hail damage |
| Explosion | Gas leaks, boiler explosions |
| Theft | Burglary, robbery |
| Vandalism | Malicious destruction |
| Falling Objects | Trees, aircraft, debris |
| Weight of Ice/Snow | Roof collapse from ice |
| Water Damage | Burst pipes (not flood) |
Common Excluded Perils
| Excluded Peril | Reason | Solution |
|---|---|---|
| Flood | Catastrophic, correlated losses | Separate flood insurance (NFIP) |
| Earthquake | Catastrophic risk | Earthquake endorsement |
| War | Uninsurable risk | None available |
| Nuclear Hazard | Catastrophic risk | Government programs |
| Wear and Tear | Maintenance issue, not sudden loss | Not insurable |
| Intentional Loss | Moral hazard | Not insurable |
Exam Alert
Key exam points for Peril:
- Peril = cause of loss (fire, theft); Hazard = increases chance (faulty wiring)
- Named perils: Insured must prove the peril caused the loss
- Open perils: Insurer must prove an exclusion applies
- Moral hazard: Character issue (fraud); Morale hazard: Carelessness from having insurance
- Flood and earthquake are EXCLUDED from standard homeowners policies
Study This Term In
Related Terms
Hazard
InsuranceA hazard is a condition or circumstance that increases the likelihood or potential severity of a loss occurring from a particular peril, classified as physical, moral, or morale hazards.
Premium (Insurance)
InsuranceAn insurance premium is the amount paid by the policyholder to the insurance company for coverage, typically paid monthly, quarterly, or annually.
Exclusion
InsuranceAn exclusion is a policy provision that specifies conditions, circumstances, or types of losses that are not covered by an insurance policy, eliminating the insurer's obligation to pay for those particular claims.
Named Perils
InsuranceNamed perils coverage only protects against specific risks explicitly listed in the insurance policy, such as fire, lightning, windstorm, and theft. If a peril is not named, it is not covered.
Open Perils
InsuranceOpen perils coverage (also called "all-risk" or "special form") protects against all causes of loss EXCEPT those specifically excluded in the policy, providing broader protection than named perils.