What does the term peril refer to in insurance?

In the context of insurance, the term "peril" specifically refers to a cause of loss. Perils are the specific risks or events that can result in damage to property or lead to liability, such as fire, theft, flood, or windstorm. Understanding this definition is crucial for both insurers and policyholders, as identifying perils is a fundamental aspect of underwriting insurance policies and determining coverage.

For instance, when an insurance policy is written, it often specifies the perils that are covered, allowing policyholders to understand what types of events their insurance will protect them against. This clarity helps in assessing potential risks when buying or evaluating insurance coverage. Recognizing what constitutes a peril is essential for making informed decisions about risk management and purchasing the appropriate insurance to mitigate those risks.