Peril
What Are Perils in Insurance?
A peril is the specific event that causes damage or loss. These commonly include types of weather, fire, and collisions.
Insurance responds to damage caused by a covered peril, under the conditions specified in your policy. That’s why two businesses can have the same loss but different claim outcomes. It often comes down to which peril caused the damage and whether that peril is covered.
Understanding whether your policy is written on a named perils or open perils basis (and which perils are excluded) helps you avoid nasty surprises when something goes wrong.
A peril is a cause of loss, like fire, theft, or wind. A hazard is a condition that increases the chance or severity of the peril, like faulty wiring or slippery floors.
What Are Common Perils in Small Business Insurance?
The most common perils in small business insurance are fire, theft, wind, and burst pipes.
Swipe →
| Category | Peril (cause of loss) | Simple example for a small business |
|---|---|---|
|
Fire |
– Fire |
Faulty wiring causes a fire in your workspace |
|
Weather |
– Windstorm |
Wind damages your roof, or hail breaks windows |
|
Water (non-flood) |
– Burst pipe |
A pipe bursts and soaks inventory or equipment |
|
Crime |
– Theft |
Theft during a break-in or vandalism to your storefront |
|
Transportation |
– Vehicle impact |
A car crashes into your building |
|
Civil disturbance |
– Riot |
Nearby unrest damages windows or signage |
Some perils (like floods or earthquakes are often not included in standard policies and may require separate coverage.
What Is the Difference Between Named Perils vs Open Perils?
“Named perils” refers to coverage for only specific perils named in your policy. “Open perils” refers to coverage for all sudden and accidental causes of loss, unless specifically excluded.
Why Do Perils Matter for Your Coverage?
Understanding perils helps you:
- Know what events your policy is built to respond to
- Spot gaps where separate coverage may be needed
- Avoid claim denials based on exclusions you didn’t realize existed
- Ask better questions when reviewing or renewing your policy
Insurance doesn’t cover everything, but it’s usually very specific about what it does cover. Perils are the key to understanding that coverage.
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