What is the difference between a peril and a hazard with respect to insurance coverage?

Personal Finance March 01, 2013 Print Friendly and PDF

Both of these terms are used frequently in insurance policies, particularly property insurance.

A peril is something that can cause a financial loss. Examples include falling, crashing your car, fire, wind, hail, lightning, water, volcanic eruptions, falling objects, illness, and death.

A hazard is any condition or situation that makes it more likely that a peril will occur. Types of hazards include:

* Physical hazards such as ice on the sidewalks, smoking, or skydiving

* Moral hazards such as dishonesty

* Morale hazards such as a careless attitude since "insurance will pay for it."

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This work is supported by the USDA National Institute of Food and Agriculture, New Technologies for Ag Extension project.