Which of these describes indirect loss?

Indirect loss refers to the financial consequences that arise from a direct loss due to an insured peril. When a property is damaged or destroyed, the immediate impact is classified as a direct loss; however, the subsequent losses that result from that event are considered indirect losses. For example, if a fire damages a restaurant, the direct loss would encompass the cost of repairing or rebuilding the premises, while the indirect losses could include business interruption, loss of income during repairs, and any additional expenses incurred as a result of the direct loss. This distinction is vital in the context of insurance, as coverage for indirect losses might be part of a broader policy or require additional endorsements.

Understanding this concept helps ensure that policyholders are aware of both direct and indirect losses when dealing with insurance claims, thereby guiding them in selecting the appropriate coverage that encompasses their potential financial impacts in the event of a loss.