Give an example of circumstances in which a business suffers both direct and indirect loss. Explain the difference between the two. (An exmaple taken from the course text is not acceptable.)
Answer:
Fire insurance policies indemnify the insured against direct loss or damage to property insured, but do not cover indirect loss. A direct loss is the loss of economic value that occurs when property is damaged or destroyed. An indirect loss is the economic loss that arise from the direct loss or damage to property.
A hotel is destroyed by a fire. The hotel own lost the value of the building. This is a direct loss. And the hotel won't be able to run business. Its business interrupted. This is an indirect loss. A photographer may have left his equipments in the hotel. The loss of equipments is a direct loss. For the photographer can not get his equipment in time so he can not report an event. This is an indirect loss.
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