Which statement about perils in property insurance is correct?

Which statement about perils in property insurance is correct?

• A. A peril is the actual means by which property is damaged or destroyed such as fire, lightning, windstorm, hail, or theft
• B. A peril is the amount of insurance coverage for a loss
• C. A peril is the deductible applied to a claim
• D. A peril is the insurer's underwriting guideline

Answer: (A)

Perils in property insurance are the actual causes of a loss—the events that damage or destroy property. Fire, lightning, windstorm, hail, and theft are examples of perils insurers might cover. The other terms describe different concepts: the amount of insurance is the limit of liability, the deductible is what the insured pays before coverage kicks in, and underwriting guidelines are the insurer’s risk rules. Policies may cover only named perils (specific causes) or all risks except exclusions (open perils); knowing what constitutes a peril helps determine whether a loss is eligible for coverage.

Perils in property insurance are the actual causes of a loss—the events that damage or destroy property. Fire, lightning, windstorm, hail, and theft are examples of perils insurers might cover. The other terms describe different concepts: the amount of insurance is the limit of liability, the deductible is what the insured pays before coverage kicks in, and underwriting guidelines are the insurer’s risk rules. Policies may cover only named perils (specific causes) or all risks except exclusions (open perils); knowing what constitutes a peril helps determine whether a loss is eligible for coverage.