What term describes a potential cause of loss in an insurance context?

In the context of insurance, the term that describes a potential cause of loss is "peril." A peril refers to specific risks or events that can lead to damage or loss covered by an insurance policy. For example, perils can include events such as fire, theft, flood, or earthquake. Understanding perils is essential when determining the scope of coverage provided by an insurance policy, as they outline what types of damages are eligible for compensation.

In contrast, coverage refers to the protections and benefits provided under an insurance policy, specifying the circumstances under which claims can be made. Exemption typically relates to exclusions in the policy where certain risks are not covered, and liability pertains to a party's legal responsibility for damages or injury. Recognizing the distinction between these terms is crucial for a comprehensive understanding of insurance principles.