What type of financial loss is caused by the occurrence of direct physical damage or theft?

The type of financial loss caused by the occurrence of direct physical damage or theft is classified as indirect loss. This form of loss arises when the underlying event, such as theft or damage, leads to additional costs that are not immediately related to the event itself.

For instance, if a business experiences theft of inventory, the direct loss is the stolen inventory's value. An indirect loss might include costs associated with business interruption, such as lost revenue during the time the business cannot operate or expenses incurred to replace the stolen inventory and resume normal operations.

Understanding this distinction is crucial, as it helps businesses plan for both immediate and longer-term financial impacts when insuring against various risks.