Texas Insurance Limited Lines Practice Exam 2025 – Complete Prep Guide

Question: 1 / 400

What term is used for expenses incurred due to a direct loss?

Direct Loss

Indirect Loss

The term used for expenses incurred due to a direct loss is "Indirect Loss." Indirect losses refer to the financial consequences that arise as a secondary effect from the primary loss, which could be a property damage or event that triggers the need for such expenses. For instance, if a fire causes damage to a business property, the direct loss is the physical damage to the building and its contents. However, the expenses for lost business income during the time it takes to repair the building, extra costs incurred for temporary relocation, and ongoing operational expenses during the downtime are classified as indirect losses.

This concept is essential in insurance, as policies often cover both types of losses, but it’s crucial for policyholders to understand the distinction between direct and indirect losses when filing claims or assessing their needs for coverage.

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Collateral Damage

Fixed Expense

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