What is meant by "salvage" in an insurance context?

In the context of insurance, "salvage" refers to the rights that the insurer retains over damaged property after a claim has been paid out. When property is deemed a total loss and the insurer compensates the policyholder, they typically acquire the right to take possession of the salvaged property. This allows the insurance company to recover some value from the damaged items by either repairing and reselling them or selling them as-is to a salvage company. This process is an important part of managing costs for the insurer, as it can help mitigate their losses.

Understanding the concept of salvage is vital for agents, as it highlights the balance between compensating the policyholder and the insurer's interests in recouping some of the payout through salvage. Other options detour from the core idea of salvage by suggesting definitions that either misrepresent its function or imply incorrect relationships between the insurer and the insured or the property itself.