Which loss type is a financial impact resulting from a direct physical loss, such as lost business income?

• A. Indirect Loss
• B. Direct Loss
• C. Consequential Loss
• D. Moral Hazard

Answer: (A)

Indirect losses describe the financial consequences that follow a direct physical loss. When property is damaged, the initial event is a direct loss—the actual physical damage to the asset. The money impact that occurs because the business can’t operate as usual during repair—such as lost business income or extra expenses—counts as an indirect loss. This is the kind of fallout insurance often addresses with coverage like business interruption. Moral hazard isn’t a type of loss; it refers to riskier behavior sparked by insurance. Some sources use the term consequential loss for the same idea, but the scenario described fits indirect loss.