Perils
Overview
Ask a shopkeeper what her fire policy covers and she will say fire. Ask her whether it pays when the fire brigade floods her stock with water to put out a blaze next door, and she will hesitate. The answer turns on a single word that runs through every claim ever settled: the peril, the actual cause of the loss, and whether the policy names it as covered, says nothing about it, or shuts it out.
In this lesson you will learn exactly what a peril is and how it differs from a risk and a hazard, meet the three families of peril that decide every claim (insured, uninsured and excepted), and master the doctrine of proximate cause, the rule that examiners use to ask whether a given loss is payable. Get the peril right and you can predict the insurer's answer before the claims officer opens the file.
Objectives
- Define a peril and give examples of insured and excepted perils
- Distinguish clearly among a peril, a risk and a hazard
- Explain how the peril insured against determines whether a claim is payable
- Classify given events correctly as perils, risks or hazards
Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on Perils. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- A peril is best described as: A. The uncertainty that a loss will occur B. A condition that makes a loss more likely C. The actual cause of a loss D. The amount payable when a loss occurs Answer: C
- Which of the following is an excepted peril under a standard fire policy? A. Lightning B. Explosion C. War D. Fire Answer: C
- A fire breaks out and the fire service uses water to put it out, ruining the insured stock. Under a fire policy, the proximate cause of the loss is: A. Water B. Fire C. The fire service D. Negligence Answer: B
- Which of the following is a peril rather than a hazard? A. Worn brake pads B. Storing petrol indoors C. Theft D. A watchman who sleeps on duty Answer: C
- A fire policy expressly excludes riot. During a riot, a mob sets the insured shop on fire and it is destroyed. The insurer will: A. Pay in full, because fire is insured B. Pay half the loss C. Pay nothing, because the proximate cause is riot D. Pay only the value of the building Answer: C
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Recommended Books
Past Questions
Wondering what past questions for this topic looks like? Here are a number of questions about Perils from previous years
Question 1 Report
Explain the following terms under marine insurance:
(a) hull policy
(b) cargo policy
(c) freight policy
(d) marine perils
(e) average
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