What is an indirect loss?

An indirect loss is defined as a loss that arises as a consequence of a covered peril, but not directly from the peril itself. This type of loss typically results from situations that occur as a secondary effect of the primary loss event. For example, if a fire damages a business, the immediate damage from the fire can be considered a direct loss, while lost income or additional expenses incurred due to the business being unable to operate following the fire would be classified as an indirect loss.

This distinction is important in the context of insurance, as it helps determine what types of losses are coverable under a policy. Coverage for indirect losses can vary depending on the policy specifics, and they are often less straightforward than direct losses.

When evaluating the other options, the first choice refers to losses that are directly and immediately caused by a peril, which does not fit the definition of indirect loss. The third option suggests that indirect losses are always covered by insurance policies, which is misleading as coverage specifics can vary significantly by policy. Lastly, the fourth option incorrectly limits the definition of indirect loss to property damage, as indirect losses can arise in various forms and contexts beyond just physical property damage.