What is defined as the cause of loss in insurance terms?

In insurance terminology, perils refer to the specific causes of loss that can lead to damage or injury. This encompasses a wide range of potential events, such as fire, theft, flood, or natural disasters, that can affect the property or assets insured under a policy. Identifying and understanding perils is crucial because insurance policies are designed to provide coverage for specific risks, and they outline which perils are included under the terms of coverage.

The concept of perils is foundational in determining whether a claim will be covered under an insurance policy. When an insured event occurs that falls within the defined perils of a policy, the insurer is typically obligated to provide indemnity for the loss incurred.

In contrast, risk refers to the uncertainty regarding financial loss, hazard relates to conditions that increase the likelihood of a peril occurring, and claims are the requests made by insured parties to receive compensation for loss or damage covered under an insurance policy. Understanding these distinctions helps clarify the role of perils as the actual events that trigger coverage.