according to this principle and insurance policy is designed to provide compensation only for such losses as are caused by the perils which are stated in the policy

Dear Student, Proximate Cause is the principle in which an insurable policy is designed to provide compensation only for such losses as are caused by the perils which are stated in the policy. Proximate Cause is the principle that applies when the loss is the result of two or more causes. The insurance company will find the nearest cause of loss to the property. If the proximate cause is the one in which the property is insured, then the company must pay compensation. If it is not a cause the property is insured against, then no payment will be made by the insured. Example: You have insured the property from the loss of fire, but the property destroyed from flood, then you will not get any compensation, as the cause doesn't matches with the contract. Regards!