What is an example of indirect physical loss?

An example of indirect physical loss is illustrated by the loss of rental income after a property is damaged. This type of loss occurs when the primary property is affected, resulting in secondary financial impacts that do not stem from the physical destruction of the property itself. For instance, if a fire or flood damages a building and renders it uninhabitable, the owner may experience a loss of rental income due to the inability to lease the property during the repair period.

In contrast, the other scenarios involve direct physical loss where there is immediate physical damage to the property itself. A fire destroying a building, a broken window due to a storm, and a flood damaging the foundation all represent direct physical losses because they involve tangible damage to the property that could require repairs and restoration. These situations do not directly pertain to financial impacts caused by the damage, which is the defining characteristic of indirect losses.