A peril is the specific cause of loss that damages your property, such as fire, windstorm, theft, or a burst pipe. Insurance policies either name the perils they cover or cover every peril except the ones they exclude, and that structural difference often decides whether your claim gets paid.
You will see the word on your declarations under the heading Covered Causes of Loss, and again in a claim denial letter if the cause of your loss was never on the list.
Peril
A cause of loss, such as fire, windstorm, or theft. A policy responds only when covered property is damaged by a peril the policy covers.
What is the difference between named perils and open perils?
A named perils policy covers only the causes of loss printed on the form. In commercial property, the Causes of Loss Basic Form names eleven: fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. The Broad Form adds falling objects, weight of snow, ice, or sleet, and certain water damage.
An open perils policy flips the logic. The Causes of Loss Special Form CP 10 30 covers direct physical loss from any cause unless the policy excludes or limits it. Theft is the everyday difference: not a named peril on Basic or Broad, covered under Special. If you do not know which form your business carries, check the declarations before you assume.
Why does the burden of proof matter to you?
Under a named perils form, you must show your loss came from one of the listed perils before the insurer owes anything. Under an open perils form, the burden reverses: the insurer must point to a specific exclusion or limitation to deny the claim.
That reversal is worth real money in murky losses. Water stains appear on a ceiling and nobody saw what happened. On a named perils form, the adjuster's first question is which listed peril you can prove caused it. On CP 10 30, the adjuster has to find an exclusion that fits. Open perils coverage costs more, and for most businesses it earns the difference.
Are some perils always excluded?
Yes. Even the Special Form excludes flood and other water perils, earth movement, wear and tear, rust and decay, mechanical breakdown, and settling or cracking, among others. Flood is the one that surprises owners most, and the exclusion applies whether the water came from nature or a broken levee. Some excluded perils can be bought back individually, and flood is usually insured through a separate policy. Ask your broker which exclusions on your form have a buyback available.
Frequently asked questions
What perils does a basic form commercial property policy cover?
Eleven named causes of loss: fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. Anything not on that list, including theft, is not covered.
Is theft a covered peril?
Only under open perils coverage. The Basic and Broad Forms do not name theft, so it is excluded by omission. The Special Form CP 10 30 covers theft because nothing excludes it, subject to limitations for certain property types.
Is flood a covered peril?
No, not under standard property forms, including the Special Form. The water exclusion applies whether the flooding is natural or man made. Flood coverage comes through a separate flood policy or a specific buyback endorsement.
What is the difference between a peril and a hazard?
A peril is the cause of loss itself, like fire. A hazard is a condition that makes the peril more likely or more severe, like oily rags stored next to a furnace. Insurers price hazards and pay for perils.
This definition is for educational purposes. Your policy's specific terms, conditions, and endorsements control. Talk to a licensed broker about your actual exposures.