What type of loss occurs as a result of a covered peril but is not directly caused by it?

The correct answer is that an indirect loss occurs as a result of a covered peril but is not directly caused by it. In insurance terminology, a direct loss refers to immediate damage or destruction of property resulting from a peril, such as a fire damaging a building.

In contrast, an indirect loss, also known as a consequential loss, refers to the financial impact that follows as a result of the direct loss. For instance, if a business experiences a fire (a covered peril) and then cannot operate for a certain period, resulting in lost revenue, that loss of income is classified as an indirect loss. It is not the immediate physical damage to the property itself, but rather the consequential effect stemming from that loss.

Understanding this distinction is crucial for insurance professionals and clients alike, as it affects how claims are processed and what type of coverage may be necessary to protect against both direct and indirect losses.