Which term describes a loss that happens directly as a result of a peril?

• A. Direct Loss
• B. Indirect Loss
• C. Consequential Loss
• D. Net Loss

Answer: (A)

Direct loss is the immediate damage caused by the peril to the property. It describes the actual physical or financial impact that happens at the moment the peril occurs—like fire damaging a structure and the repair costs needed to restore or replace the property. Indirect or consequential losses are the failures or costs that come as a follow-on to that initial damage, such as lost rent or extra living expenses while repairs are underway. Net loss isn’t used to describe the relationship between a peril and its impact in this context. So the term describing a loss that happens directly from the peril is direct loss.