What does the term 'peril' mean in insurance?

In the context of insurance, the term 'peril' refers specifically to an event or situation that can cause a loss covered by an insurance policy. This can include a variety of risks such as theft, fire, natural disasters, or accidents that result in financial damage to an insured property or individual. It is crucial to understand that for a claim to be valid under an insurance policy, the loss must stem from a peril that is explicitly listed or defined in the policy coverage.

Understanding the concept of peril is essential for both insurers and policyholders, as it outlines the situations for which coverage is provided and helps clarify the scope of the financial protection that insurance offers. In essence, identifying perils helps both parties understand the nature of the risks involved and what kinds of losses can be claimed for compensation. This connection between peril and loss eligibility is central to the functioning of insurance policies.