What does 'salvage' refer to in insurance terms?

In insurance terms, 'salvage' refers to the process of selling off property that has been determined to be a total loss. When an insured property, such as a vehicle or building, is damaged beyond repair, the insurance company may choose to take possession of the property and then sell it to recover some of the losses incurred from the claim. This practice not only helps in reducing the overall payout by the insurer but also allows them to recoup some of the value from the damaged property.

The concept of salvage is crucial as it impacts how insurance claims are settled and can influence the insurance payouts made to policyholders. Insurers assess the salvage value before finalizing a claim, and this valuation plays a significant role in their financial calculations regarding overall losses. Thus, recovering costs from the sale of a total loss property is a standard practice within the industry, making this understanding vital for anyone working within the insurance field.