Property & Casualty Insurance Exam (National Portion)Property and Casualty Insurance BasicsMedium
An insurance policy contains a clause stating that the insurer may, but is not required to, take possession of damaged property after paying for a total loss. This clause describes the insurer's right of:
- ASalvage
- BAppraisal
- CAbandonment
- DSubrogation
Show answer & explanationAnswer & explanation
Correct answer: A. Salvage
Salvage is the right of the insurer to take possession of damaged property after paying a total loss, and then sell it to recover some of the loss paid out. This reduces the overall cost of the claim for the insurer.
Why the other options are wrong
- B. Appraisal is a process to resolve disputes over the value of property or amount of loss.
- C. Abandonment is the insured's act of giving up damaged property to the insurer, which is typically not allowed under policies.
- D. Subrogation is the insurer's right to pursue a third party responsible for the loss.
Salvage
The right of the insurer to take possession of damaged property after paying a total loss, and then sell it to recoup some of the claim payment.
- Applies after a total loss payment.
- Reduces the insurer's net loss.
- Often seen with vehicles or heavily damaged goods.
Memory trick: Provisions: The 'PRO-mises' and 'PRO-cedures' inside your policy.