Principles of Risk Management and Insurance, 13th Edition

Peril and Hazard

The terms peril and hazard should not be confused with the concept of risk discussed earlier.

Peril

Peril is defined as the cause of loss. If your house burns because of a fire, the peril, or cause of loss, is the fire. If your car is damaged in a collision with another car, collision is the peril, or cause of loss. Common perils that cause loss to property include fire, lightning, windstorm, hail, tornado, earthquake, flood, burglary, and theft.

Hazard

A hazard is a condition that creates or increases the frequency or severity of loss. There are four major types of hazards:

• Physical hazard

• Moral hazard

• Attitudinal hazard (morale hazard)

• Legal hazard

Physical Hazard

A physical hazard is a physical condition that increases the ...