Registered Insurance Brokers of Ontario (RIBO) Practice Exam

In terms of insurance, what does the term "peril" refer to?

1. A risk of loss

2. A type of coverage

3. An insured person

4. A claims process

The correct answer is: A risk of loss

The term "peril" in insurance specifically refers to the cause of loss or damage that might affect an insured entity or property. This definition aligns with the understanding that a peril signifies a risk or a hazard that can lead to a financial loss, such as fire, theft, or natural disasters like floods. Recognizing perils is critical for both insurers and insured individuals, as it helps determine what risks are covered under a policy and how claims will be processed if those risks materialize. While there are other terms in the insurance vocabulary, such as coverage, insured persons, and claims processes, these do not directly correspond to the definition of "peril." Coverage pertains to the protection provided against specific risks, an insured person is an individual who is covered by the insurance policy, and a claims process refers to the procedure for processing claims related to losses. These concepts are interconnected, but they distinctly differ in meaning from what "peril" represents in the context of insurance.