Alabama Insurance Adjuster Practice Exam

What type of loss would the rental car expense be considered after Jonathan's accident?

1. Direct loss

2. Indirect loss

3. Moral hazard

4. Property damage

The correct answer is: Indirect loss

The rental car expense would be considered an indirect loss because it does not result from a physical damage to property but rather from the unforeseen circumstances following a loss event—such as an accident. In this scenario, Jonathan’s need for a rental car arises because he is unable to use his own vehicle due to the accident. The direct loss would refer specifically to the damage to the vehicle itself, while the indirect loss encompasses additional expenses incurred as a consequence of that damage, such as the cost associated with renting a vehicle during repair or replacement of the damaged one. Indirect losses typically cover situations where the insured must deal with additional financial burdens that arise from the initial loss. In this case, the necessity of securing a rental car to maintain mobility is secondary to the primary loss of the vehicle's use. Understanding the classification of losses is crucial for insurance adjusters, as it helps in assessing claims accurately and determining what coverage may apply.