What is meant by "peril" in an insurance context?

In the context of insurance, "peril" refers to a specific risk or cause of loss that is covered by an insurance policy. This concept is fundamental to understanding how various types of insurance work. For instance, in a homeowners' insurance policy, perils such as fire, theft, and windstorm are typically included as risks that the policy will cover.

When a policyholder experiences a loss due to one of the covered perils, they may file a claim to receive compensation for their loss. Understanding perils helps consumers assess which risks they need coverage for and encourages them to choose policies that suit their individual needs, ensuring they are financially protected against specific threats to their property or income.

In contrast to this definition, other choices do not accurately define "peril." A specific insurance policy refers to the written contract outlining the terms of coverage, while a loss due to negligence is broader and pertains to liability issues, rather than a specific cause of loss. Lastly, while hazards can encompass various risks, referring to peril as a general term for all hazards fails to capture the specificity that is essential in determining what is covered under an insurance agreement.