Peril
Peril is the main cause of the accident. It can be defined as the cause of loss. If a house burns because of a fire, the peril is the fire. If a car is damaged in a collision with car, collision is the peril. Common perils that cause damage to the properties include fire, earthquakes, theft, burglary, windstorm, hail lighting and tornados.Hazard
Any condition that creates or increase the chance of loss is called hazard. Basically, there are four major types of hazards namely
1. Physical hazard
A physical situation that increases the chance of loss is called physical hazard. For example, defective construction of bridge is the physical hazard that increase the change of breakdown, defective production of vehicle is also a physical hazard, which increase the chance of accident of the road, defective wiring is the physical hazard that increase the chance of the electric shoo and firing
2. Moral hazard
Human is the mist important factor for all activities in the organization. Morality is the essential element for smooth operation of every activity. Moral hazard is the dishonesty or character defects in an individual that increase the frequency of accident and badness. For example, intentionally burning unsold goods that are insured, inflating the amount of a claim, submitting a fraudulent claim etc. Moral hazard is present in all forms of insurance. It is difficult to control. The insurance try to control moral hazard by various policy and provisions regarding insurance. Careful underwriting of applicants for insurance cal also controls the frequency of moral hazard. Moral hazard increases the unfair claims and payments. So it is harmful for insurance business. Because of moral hazard, premiums are higher for everyone.
3. Morale Hazard
3. Morale Hazard
In general, moral and morale seem to be same in meeting actually, moral hazard refers to dishonesty and fraudulence. Whereas, the moral hazard refers to carelessness and indifference to a loss by accident. Morale hazard is carelessness of indifference to a loss because of the existence of insurance. Generally, some insured care careless to a loss because they have insurance. For example morale hazard includes the leaving a door unlocked that allows a burglar to enter in the insured warehouse, driving the insured car carelessly etc.
4. Legal Hazard
Legal hazard refers to characteristics of the legal environment or legal system that increase the frequency of losses. The chance of legal hazard increase, when there are loopholes or weakness in the procedure or regulatory system of the insurance company.
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