indirect loss

Indirect loss insurance covers financial consequences that are not a direct result of a covered peril, such as fire. While standard property insurance covers the physical damage to property, indirect loss insurance, like business income insurance, reimburses for lost profits or ongoing expenses incurred due to that damage. For example, if a fire forces a business to close temporarily, business income insurance can cover the lost revenue and fixed costs like salaries and taxes that continue despite the shutdown. Other forms include contingent business income insurance (for losses due to supplier or customer plant destruction), extra expense insurance (for costs of substitute facilities), and rent insurance. Indirect losses are typically excluded from standard fire insurance policies but can be covered by separate contracts.12