What does 'insured peril' refer to in insurance terminology?

The term 'insured peril' refers to a risk that is specifically covered by an insurance policy. When an insurance policy is created, it defines various perils or risks that can lead to a loss, and it makes clear which of those perils are included under the coverage provided by the policy.

In the context of insurance, the purpose of identifying insured perils is to establish the scope of protection the insurer offers to the policyholder. For example, in a homeowner's insurance policy, insured perils might include fire, theft, or water damage. If a loss occurs that aligns with one of these insured perils, the insurance provider is obligated to compensate the policyholder according to the terms of the policy.

The other options relate to concepts in insurance or investing but do not capture the definition of 'insured peril.' These alternatives may discuss exclusions or risks in a different context, but they do not specifically describe the coverage aspect that 'insured peril' entails. Understanding the difference between covered and excluded risks is fundamental in assessing insurance policies and managing risk effectively.