Perils vs Hazards
A Peril and a Hazard in home insurance are two distinct concepts. A Peril refers to a specific event that can result in a loss, such as theft, fire or flood. On the other hand, a hazard is a condition that increases the likelihood of a Peril occurring, making the loss more probable.
Let’s break it down further with an example. Imagine you buy a property, and you’re considering the risks associated with it. In this case, a Peril is the actual occurrence of a fire.
A Hazard increases the likelihood of a fire (Peril). In this example, having faulty wiring in the property is a Hazard because it raises the risk of a fire breaking out.
An understanding of Perils and Hazards helps assess and manage risks effectively. To summarise, Perils are specific events or causes that can lead to loss or damage, like a fire, flood, or theft. On the other hand, Hazards such as defective electrical wiring increase the likelihood of a Peril occurring, making the risk of loss more significant.