Texas Personal Lines Insurance Exam 2025 – 400 Free Practice Questions to Pass the Exam

An additional loss that results from a direct loss of property is known as an indirect loss. This type of loss is not a direct consequence of the physical damage to the property itself; instead, it arises from the impact of that direct loss on the policyholder's financial situation or ongoing operations.

For example, if a fire damages a business, the direct loss would be the repairs needed for the building and equipment. An indirect loss, on the other hand, could involve the loss of income due to business interruption while the repairs are being made, as the business cannot operate normally during that time. Indirect losses are often recognized and covered under specific insurance policies, like business interruption insurance, as they highlight the broader financial implications of a direct loss.

In contrast, direct loss refers specifically to the immediate damage to the property, while collateral loss and secondary loss are terms not commonly used in this context and do not accurately describe the financial impact of losing the property and its subsequent effects on income or operations.