What does 'peril' refer to in the context of insurance?

In the context of insurance, 'peril' specifically refers to the actual cause of a loss. This encompasses events or circumstances that can lead to damage or destruction of property, such as fire, theft, vandalism, or natural disasters. Understanding peril is crucial for determining the coverage provided by an insurance policy, as insurers often specify which perils are covered under a policy.

For example, if a homeowner's insurance policy covers fire and a fire occurs that damages the home, the fire itself is the peril that triggered the claim. Accurately identifying the peril is essential for both the insured and the insurer because it directly influences the claims process and the compensation that may be awarded. This definition establishes a fundamental concept in insurance that serves as the basis for evaluating coverage and assessing risk.