Understanding An Indirect Loss On An Insurance Policy

When a loss occurs, and a claim is filed, the is more underneath the problem than first understood. That loss could be a pipe breaking in your house, a fire in the kitchen or any other type of occurrence. During this time all that is on the policyholders mind, is the loss at hand. But there is another loss creeping up on them, most of the time realizing it at the last second.  This is known as an indirect loss.

What is an indirect loss?

An indirect loss is a loss that occurs because of another loss.  It is an underlying loss that takes place because of a larger loss.   On a homeowners, loss of use of a home would be an indirect loss.    An example of this is, Johnny’s house catches on fire, because of the smoke, Johnny cannot stay in the house.  Johnny has to rent a hotel room because of the smoke in his home.  This is an indirect loss.

An example on an auto insurance policy is when Judy crashes her car and has to have it repaired.  She rents an auto to use while her car is being repaired because she doesn’t have a car to drive back and forth to work.   The expense of the rental car is an indirect loss.

An example of an indirect loss for a business is lack of business income.  Because of a loss, the business can no longer gain income and therefore profits are hurt.

In conclusion, an indirect loss comes from a bigger loss.

 

Advertisements

About Mark A. Schneider
Owner of Denvers Insurance and Close Contact Security Services.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: