Perils are an important aspect of property insurance. Which statement about perils is correct?

Perils are an important aspect of property insurance. Which statement about perils is correct?

• A. In order to be covered by an insurance policy, a peril must be defined and described in that policy.
• B. A peril is anything that increases the frequency or the severity of a loss.
• C. A peril is the actual means by which property is damaged or destroyed such as fire, lightning, windstorm, hail, or theft.
• D. Property insurance policies can cover specific perils and cannot exclude other perils.

Answer: (C)

Perils are the actual causes of loss—the events that damage or destroy property. Examples include fire, lightning, windstorm, hail, and theft. This idea is why that statement is the best: it identifies a peril as the concrete event that results in a loss, which is what insurance coverage is responding to. Policies can be written to cover only specific perils (named perils) or to cover all risks except those specifically excluded (open perils). Because of this, it isn’t accurate to say a peril must be defined and described in the policy for coverage, since open-perils forms cover losses from many perils not individually listed. It’s also not a hazard, which is something that increases the likelihood or severity of a loss but isn’t the event causing the loss itself. Finally, coverage isn’t limited to only specific perils with no exclusions; terms can exclude certain perils or provide broader protection depending on the policy form.

Perils are the actual causes of loss—the events that damage or destroy property. Examples include fire, lightning, windstorm, hail, and theft. This idea is why that statement is the best: it identifies a peril as the concrete event that results in a loss, which is what insurance coverage is responding to.

Policies can be written to cover only specific perils (named perils) or to cover all risks except those specifically excluded (open perils). Because of this, it isn’t accurate to say a peril must be defined and described in the policy for coverage, since open-perils forms cover losses from many perils not individually listed. It’s also not a hazard, which is something that increases the likelihood or severity of a loss but isn’t the event causing the loss itself. Finally, coverage isn’t limited to only specific perils with no exclusions; terms can exclude certain perils or provide broader protection depending on the policy form.