How are indirect losses typically categorized in insurance policies?

Indirect losses in insurance policies are typically categorized as consequential losses. This classification is important because it distinguishes these types of losses from direct losses. Consequential losses refer to the secondary effects resulting from a direct loss, such as loss of business income when a business cannot operate due to property damage.

In contrast, basic coverage often refers to the primary coverage provided for direct damages, while unexpected expenses do not accurately encapsulate the nature of indirect losses, and primary losses are primarily the initial and direct losses suffered. By understanding that consequential losses arise as a result of direct losses, it becomes clear why categorizing indirect losses in this way is essential in insurance policy discussions.