What must be true for an insurance policy to cover damages effectively?

For an insurance policy to cover damages effectively, it is crucial that the policy specifies and includes coverage for the particular peril that causes the damage. This means that if a specific event or risk leads to a loss, the insurance contract must explicitly state that such a risk is covered in order for a claim to be valid.

When a policy covers specific perils, it directly aligns with the principle of indemnity, which aims to restore an insured party to their pre-loss position, as long as the cause of the loss is included within the coverage terms. For example, if a home is damaged due to fire, the policy must have fire damage coverage included; otherwise, the homeowner would not be reimbursed for repairs.

In contrast, policies that are comprehensive are not necessarily required in all situations; some may only need to cover specific perils. Policies that exclude all types of risks would not provide any coverage, thus failing to serve their purpose. A waiver clause is more about relinquishing rights rather than essential for coverage, making it less central to the question of effectively addressing damages through insurance.