General Insurance Concepts
The vocabulary that drives every question
Risk is uncertainty about loss; insurance transfers only pure risk (chance of loss or no loss), never speculative risk (chance of gain). A peril is the cause of loss (fire, theft, death, illness). A hazard is a condition that increases the chance or severity of loss: physical (icy steps, faulty wiring), moral (dishonesty, such as arson for profit), and morale (carelessness because insurance exists). Questions routinely swap peril and hazard.
Contract characteristics
Insurance is a contract of adhesion (insurer writes it, ambiguities favor the insured), aleatory (unequal exchange of value), unilateral (only the insurer makes an enforceable promise once premium is paid), conditional (benefits depend on conditions), and personal. It requires offer, acceptance, consideration, legal purpose, and competent parties. Principles include utmost good faith (representations, warranties, concealment), indemnity (restore, don't profit), insurable interest, and subrogation (insurer steps into the insured's shoes after paying).
Traps
Insurable interest timing differs: in life, it must exist at policy issue; in property, at the time of loss. Representations are believed true; warranties are guaranteed true; concealment is intentional silence about material fact. Waiver is giving up a known right; estoppel prevents reclaiming it after the other party relied on it. Remember the Law of Large Numbers (more exposures = more predictable losses) and adverse selection (high-risk buyers seek coverage), which underwriting and exclusions exist to control.
Rule of thumb
Peril = what happens. Hazard = what makes it more likely.
Worked example: A homeowner leaves oily rags near a furnace. Fire is the peril; the rags are a physical hazard; the claim's severity rises because of that hazard.