Direct loss is the immediate loss caused by the insured event itself. It is typically covered in first-loss sections before consequential impacts are considered.
Example examples include fire-damaged walls, crashed windows, or stolen goods. It is distinct from losses like business interruption, which happen later due to halted operations.
Claims handling
Adjusters first prove direct physical damage before opening consequential layers. Incorrectly classifying consequential costs as direct loss can create coverage disputes and incorrect reserve allocations.
Example
If a water main breaks in a store, damaged inventory is direct loss; the temporary revenue drop from closures is a separate consequential exposure.