South Carolina Personal Lines Practice Exam

Which type of loss typically results from a direct peril?

1. Consequential loss

2. Supplemental loss

3. Direct loss

4. Indirect loss

The correct answer is: Direct loss

A direct loss occurs when property damages or losses arise directly from a covered peril, meaning the loss can be traced directly back to an event such as theft, fire, or vandalism. This type of loss is straightforward as it involves physical damage to the property itself, such as the destruction of a building due to a fire. In contrast, other types of losses involve additional considerations or are not directly attributed to the immediate cause. For instance, consequential loss refers to secondary effects or financial impacts that arise from the direct loss, such as lost income due to business interruption because of property damage. Indirect loss is similar, emphasizing losses that occur as a result of direct damage, but that are not the result of any physical damage to the property itself. Supplemental loss is a less commonly used term, but it typically refers to additional expenses incurred beyond the initial loss. Understanding the distinction between these types of losses is key, as it helps in determining how insurance coverage responds to different scenarios and ensures that individuals and businesses can adequately protect themselves against various risks.