Canadian Accredited Insurance Broker (CAIB) One Practice Exam

Which term describes damage to an insured property caused by external forces like fire or theft?

1. Deliberate damage

2. Natural damage

3. Accidental damage

4. Direct loss

The correct answer is: Direct loss

The term that describes damage to an insured property caused by external forces such as fire or theft is classified as direct loss. Direct loss specifically refers to damages that occur as a direct result of a peril, meaning the damage is straightforwardly linked to the event itself. In the context of property insurance, perils that lead to direct loss include fire, theft, vandalism, and other specific incidents that impact the property directly. Understanding direct loss is crucial for insurance policyholders, as this type of loss is generally covered under standard property insurance policies. Coverage for direct loss helps ensure that property owners can recover the value of their assets when they face such unfortunate events. In contrast, other terms mentioned do not accurately capture this scenario. Deliberate damage typically refers to damage inflicted intentionally, which is often not covered by standard insurance policies. Natural damage might suggest issues arising from natural events, but it doesn’t encompass man-made events like theft. Accidental damage, while it suggests unintentional actions, is broader and may not specifically pertain to the defined external forces of fire or theft that directly cause property damage. Thus, direct loss is the most accurate and relevant term in this context.