What type of loss does property insurance typically cover?

Property insurance primarily covers direct losses, which are losses resulting from physical damage to tangible property. This type of insurance is designed to reimburse policyholders for the cost of repairing or replacing property that has been lost or damaged due to covered perils, such as fire, theft, or natural disasters.

Direct losses are specifically related to the actual, immediate effect of an event on the property itself. For example, if a home is damaged by a fire, the direct loss refers to the cost involved in repairing the structure and replacing any destroyed items.

While other types of loss exist, such as consequential loss, which refers to secondary damages that result from a direct loss (like lost income due to a business outage), property insurance generally does not cover these. Instead, it focuses on tangible damages, making it crucial for property owners to understand the scope of their coverage to adequately protect their assets.