What is defined as a direct loss?

• A. Loss of income from a business interruption
• B. Physical harm to tangible property caused by a covered peril
• C. Financial loss due to market fluctuations
• D. Loss of value due to depreciation

Answer: (B)

A direct loss is defined as physical damage or harm to tangible property that results from a covered peril, such as fire, theft, or vandalism. This definition includes any immediate and quantifiable damage to property that directly results from an insured event. For example, if a fire destroys a building, the direct loss is the cost to repair or replace the damaged structure. This type of loss is typically insurable under standard property insurance policies, which aim to cover the replacement or repair costs for damages inflicted by specified risks.

In contrast, other types of losses listed, such as income loss from business interruption, represent indirect or consequential losses that arise as a result of the direct loss. Financial losses caused by market fluctuations or losses due to depreciation are also not classified as direct losses since they don't involve physical damage to property caused by a covered event. Thus, the focus on physical harm to tangible property makes the definition of direct loss clear and specific, aligning it with the answer that identifies physical harm resulting from a covered event.