In commercial property insurance, what is defined as a direct loss?

In commercial property insurance, a direct loss refers specifically to damage to property. This concept encompasses any physical harm to the insured property itself, which may include buildings, equipment, and inventory. When a property suffers a direct loss, it often results from events like fires, theft, or natural disasters, leading to the need for repairs, replacement, or restoration of the damaged assets.

Other options, while relevant aspects of financial loss in commercial property insurance, do not fall under the definition of direct loss. For instance, damage to inventory is indeed a direct loss because it pertains to the physical damage to items meant for sale or trade. However, losses such as business income or extra expenses incurred pertain to business operations rather than the direct physical condition of the property. Business income losses relate to the financial impact of being unable to operate due to property damage, while extra expenses arise from the efforts to continue operations or reduce income loss after a covered event. These concepts are categorized as indirect losses, differentiating them from the direct loss associated purely with damage to property.