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For Example:

A company had a Fire insurance policy.

If stocks of the company are burnt then the cause of loss is fire

(which is an Insured Peril under a fire policy); the claim would

be payable. However if the stocks are destroyed due to flash

floods as they were stored on lower level, the loss was not

payable as flood was not an Insured peril covered in fire policy.

Flood policy was needed to take care of ‘loss’. It is therefore

important to identify the cause of loss and to see if it is an

Insured peril or not before admitting / processing a claim.

Hazard

Multiple factors, which may adversely influence the outcome of

any event, are referred to as hazards. These hazards are not

themselves the cause of the loss, but they can increase or

decrease the effect should a particular peril operate. The

consideration of hazard is important when an insurance

company is deciding whether or not it should insure some risk

and what premium to charge. So a hazard is a condition that

creates or increases the chance of loss.

There are three major types of hazards: Hazard can be physical

or moral or morale.

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