What is defined as an economic loss resulting from direct or physical loss?

• A. Actual Loss
• B. Indirect Loss
• C. Opportunity Loss
• D. Direct Loss

Answer: (B)

The correct answer is the concept of Indirect Loss, which is understood as a type of economic loss that occurs as a consequence of a direct or physical loss. When an event, such as a fire, flood, or theft, damages property, the immediate financial impact is categorized as a direct loss. However, the financial repercussions that follow—such as loss of income due to business interruption or additional expenses incurred—fall under indirect losses.

This distinction is important in risk management and insurance as it underscores the two layers of financial impact that can occur from an incident. Therefore, businesses and homeowners alike need to consider insurance coverage that addresses both direct and indirect losses to ensure comprehensive protection against potential economic challenges stemming from covered events. Recognizing this hierarchy of losses helps in planning and managing risks effectively.