What type of loss refers to indirect economic loss that results from a direct loss?

The type of loss that refers to indirect economic loss resulting from a direct loss is known as indirect loss. This term encompasses the financial repercussions that arise as a consequence of a direct loss event, such as property damage or theft. For instance, if a business suffers a fire that destroys its equipment, the immediate cost of replacing that equipment is the direct loss. However, the subsequent loss of income due to the business being temporarily unable to operate, as well as ongoing expenses like rent and salaries, are considered indirect losses.

Understanding this distinction is crucial in the context of insurance and damage appraisal, as indirect losses can significantly affect the overall financial impact on individuals or businesses following a direct loss event. Recognizing and categorizing these types of losses is essential for accurate damage assessment, insurance claims, and overall financial planning following an incident.