What is an indirect loss and what is another term for it?

An indirect loss refers to a financial loss that occurs as a consequence of a direct loss. It does not arise directly from damage to property but rather stems from the effects of that damage. For example, if a business suffers a fire that destroys its equipment (the direct loss), the loss of income during the time it takes to repair or replace that equipment would be considered an indirect loss.

The term "consequential loss" is often used interchangeably with indirect loss. This terminology highlights the idea that the loss is a result of an earlier event or damage, thus emphasizing the cascade of effects that follow the original incident.

Understanding this distinction is essential in the context of property and casualty insurance, as policies may cover direct losses while requiring additional endorsements or separate policies to cover consequential or indirect losses.