What factor determines whether a specific peril is covered under an insurance policy?

The determination of coverage for a specific peril under an insurance policy primarily hinges on whether the peril is explicitly named in the contract. Insurance policies are based on the principle of indemnity, which means that they must explicitly outline the coverage provided. If a peril is not stated in the policy, then it is generally not covered, regardless of its frequency, recognition as a risk, or affordability.

By clearly naming covered perils, the insurance contract defines the scope of protection and limits the insurer's liability to those explicitly listed risks. This clarity protects both the insurer and the insured, ensuring that both parties understand what is covered and what is not. Therefore, the specificity of the policy contract is crucial for determining coverage.