South Carolina Personal Lines Practice Exam

A tornado that destroys property is considered what in insurance terms?

1. Hazard

2. Event

3. Peril

4. Claim

The correct answer is: Peril

In insurance terminology, a tornado that destroys property is classified as a peril. A peril is defined as a specific risk or cause of loss that leads to damage or destruction of property. In this context, the tornado represents a natural disaster that can lead to significant property damage, and insurance policies typically list perils covered under the policy provisions. Understanding this term is crucial for comprehending how insurance coverage functions. For example, homeowners' policies often cover certain perils, including tornadoes, while excluding others. This distinction helps in evaluating risks and determining what damages a policy will address. Other terms in the list serve different roles in insurance. A hazard refers to a condition that increases the likelihood or severity of a loss, such as living in a tornado-prone area. An event generally describes an occurrence but is less specific than peril in the context of losses. Lastly, a claim is a formal request made by the insured to the insurance company for compensation due to losses incurred from a peril. Understanding these distinctions aids in grasping the foundational concepts of insurance coverage and risk management.