Which term refers to financial coverage for the costs incurred following a direct loss?

The term that refers to financial coverage for the costs incurred following a direct loss is an indirect loss. Indirect losses, also known as consequential losses, arise as a result of a direct loss event. For example, if a business experiences a fire (the direct loss) that destroys its property, it may also incur additional costs such as lost sales, rental expenses for temporary premises, and ongoing payroll expenses. These additional costs are classified as indirect losses because they stem from the initial direct loss and represent financial repercussions that go beyond the immediate damage.

In contrast, the other options do not specifically represent the coverage for costs incurred from direct losses. Direct compensation typically refers to reimbursement directly related to the loss without considering second-order financial impacts. Indemnity benefits may relate to compensation for specific covered losses but do not specifically capture the broader concept of costs incurred due to indirect losses. Coverage expansions generally refer to enhancements in policy that broaden the scope or limits of coverage but do not specifically define financial losses incurred from a direct loss.