What is the term for indirect losses that occur as a consequence of a direct loss?

The term for indirect losses that occur as a consequence of a direct loss is known as "Consequential Loss." This concept is crucial in insurance and risk management because it refers to the financial impact that arises from a direct loss event. For example, if a business experiences a fire (a direct loss), the costs that result from the business being unable to operate—such as loss of revenue, increased expenses, or costs incurred to restore operations—are considered consequential losses.

Understanding this distinction is essential for insurance policies, as coverage for indirect losses may differ from that for direct losses. Policies often specify how consequential losses are addressed, ensuring that individuals and businesses can plan for the financial impact that follows a direct loss incident. This helps policyholders grasp the broader financial repercussions of risks and the importance of comprehensive insurance coverage that includes these potential losses.

In contrast, terms like "Direct Loss," "Imputed Loss," and "Supplemental Loss" may not accurately capture the nature of indirect financial impacts linked to a direct loss, emphasizing the significance of recognizing and understanding consequential loss in risk assessment and insurance planning.