How is the term 'peril' defined in insurance terms?

In insurance terms, 'peril' is defined as a cause of loss. This refers to specific events or circumstances that can result in damage or destruction of property or lead to a liability claim. Common examples of perils include fire, theft, floods, and natural disasters. Understanding perils is crucial for policyholders because insurance policies typically list the perils that are covered and those that are excluded. By knowing what perils are included in their policy, individuals and businesses can better assess their risks and make informed decisions about their insurance needs. The focus on perils helps to clarify the relationship between the cause of a loss and the financial protection that a policy offers against such events.