A peril is the actual cause of a loss—the event that does the damage. Fire, theft, windstorm, hail, and collision are all perils. When you read an insurance policy, the perils are what determine whether a loss is covered, because policies promise to pay for damage caused by certain perils and not others.

Why it matters

Coverage lives or dies on the peril. If your policy covers the peril that caused your loss, you're paid; if it doesn't, you're not. Understanding perils helps you read a policy correctly and explain to a client exactly what is—and isn't—protected.

Named peril vs. open peril

This is the central distinction:

• Named-peril (specified-peril) policies cover only the perils specifically listed. If the cause isn't on the list, there's no coverage. The burden is on the insured to show the loss came from a listed peril.
• Open-peril (special / "all-risk") policies cover every cause of loss except those specifically excluded. Coverage is broader, and the burden shifts to the insurer to prove an exclusion applies.

A simple example

Lightning strikes a tree and it crashes through your roof. Fire and windstorm are common covered perils, so the resulting damage is typically paid. But if your home floods from a rising river, flood is usually excluded from standard homeowners policies—so that peril wouldn't be covered without separate flood insurance.

Don't confuse it with…

A peril is the cause of loss; a hazard is something that increases the chance of a peril happening. Fire is a peril; storing oily rags in a corner is a hazard that makes the fire peril more likely.

On the exam

Nail the named-peril vs. open-peril distinction and who bears the burden of proof. Keep the peril-vs-hazard difference straight, and remember that exclusions are how open-peril policies carve out what they won't cover.