South Carolina Personal Lines Practice Exam

If the insured peril was the proximate cause of loss, what type of loss is it?

1. Direct

2. Indirect

3. Consequential

4. Supplemental

The correct answer is: Direct

A direct loss occurs when the insured peril is the immediate cause of the damage or destruction of property. In this context, if the peril, such as a fire or theft, directly results in the loss without any intermediate cause, it qualifies as a direct loss. This means that the loss is a direct and foreseeable result of the insured event happening. In contrast, indirect losses, like indirect costs, are those that occur as a result of a direct loss but are not directly linked to the peril itself. These might include loss of use or business interruptions that arise due to the initial damage. Consequential losses refer to costs or losses that are a secondary result of the initial loss, often covered under specific circumstances depending on the policy. Supplemental losses are generally not a standard category in personal lines and would usually refer to additional coverages or costs not directly tied to the main loss. Therefore, when the insured peril directly causes the loss, it is classified as a direct loss.