What term best represents actual physical damage that affects a property owner's asset?

The term that best represents actual physical damage affecting a property owner's asset is direct loss. Direct loss refers to the tangible harm that occurs to a property as a result of a specific event, such as a fire, theft, or severe weather. This type of loss results in a loss of value or functionality of the asset itself, which is what property insurance typically covers.

In contrast, indirect loss involves financial impacts that stem from a direct loss, such as loss of rental income when a property cannot be rented out due to damage. Vandalism, while it can cause direct loss, is a specific type of event rather than a general term for damage. Riot is also a specific event that may lead to direct loss but does not encompass the broader category of events that might cause physical damage. Therefore, direct loss is the most accurate term to describe actual physical damage to an asset.