What is the difference between a peril and a hazard?

A peril is any event that can cause a financial loss. Examples include a car crash, death, disability, fires, floods, illness, theft, and tornadoes (wind). An insurance agent can help you calculate the potential loss that you might experience from various types of perils as part of the process of determining how much coverage you need.

For example, insurance agents routinely use worksheets to determine a family’s life insurance needs. You might also be able to estimate the cost of a peril mathematically (e.g., 30 years @ $50,000 of average lost income = $1,500,000, plus an inflation factor).

A hazard is something that increases the probability that a peril will occur. Examples include slick roads during a snowstorm, leaving car doors unlocked, and driving while under the influence of alcohol.

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