Which term refers to the actual cause of a loss, such as fire or theft?

• A. Hazard
• B. Premium
• C. Peril
• D. Risk

Answer: (C)

Peril refers to the actual cause of a loss—the event that money is paid out for under the policy. When a policy lists covered perils, it means losses caused by those specific events are potentially payable. Fire and theft are classic examples of perils because they are the events that trigger a claim.

A hazard, on the other hand, is a condition that makes a loss more likely (like faulty wiring or leaving a door unlocked). Risk is the overall chance of experiencing a loss, often considering both likelihood and severity, not the specific event itself. Premium is simply the price paid to obtain the insurance coverage, not a loss cause.

So, the term that best fits “the actual cause of a loss, such as fire or theft” is peril.