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♻️ '''Salvage (insurance)''' is the residual value an [[Definition:Insurance carrier | insurer]] recovers from damaged or [[Definition:Total loss | totaled]] property after paying a [[Definition:Claims | claim]] to the [[Definition:Policyholder | policyholder]]. When a vehicle is declared a total loss, a building's contents are partially destroyed by fire, or cargo is damaged in transit, the insurer takes ownership of — or a financial interest in — whatever remains, and then sells or auctions those remnants to offset the amount paid on the claim.

⚙️ The salvage process begins once the [[Definition:Claims adjuster | adjuster]] determines that repair costs exceed the item's [[Definition:Actual cash value (ACV) | actual cash value]] or a contractually defined threshold. In [[Definition:Auto insurance | auto insurance]], carriers typically transfer wreck titles to salvage auction platforms, where rebuilders and parts recyclers bid on the vehicles. In [[Definition:Marine insurance | marine]] and [[Definition:Property insurance | property]] lines, salvage might involve recovering undamaged goods from a warehouse or stripping usable materials from a damaged structure. The insurer credits the salvage proceeds against the gross claim payout, which directly reduces the net [[Definition:Incurred loss | incurred loss]] recorded for that event. Effective salvage management requires coordination between claims teams, salvage vendors, and sometimes specialized recovery firms — particularly for complex losses involving heavy equipment or hazardous materials.

💰 Robust salvage recovery has a measurable impact on an insurer's [[Definition:Loss ratio (L/R) | loss ratio]] and overall [[Definition:Underwriting profit | underwriting results]]. Even marginal improvements in recovery rates, when scaled across thousands of claims, can translate into millions of dollars in savings. This is why many carriers invest in dedicated salvage operations, use data analytics to identify claims with high recovery potential early in the process, and negotiate volume-based agreements with auction networks. For [[Definition:Reinsurance | reinsurers]] and [[Definition:Excess of loss reinsurance | excess-of-loss]] treaty participants, how a ceding company handles salvage — and whether recoveries are shared — is often explicitly addressed in [[Definition:Reinsurance treaty | treaty]] wording, making it a negotiation point in capacity placement.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Subrogation]]
* [[Definition:Total loss]]
* [[Definition:Actual cash value (ACV)]]
* [[Definition:Claims adjuster]]
* [[Definition:Loss ratio (L/R)]]
* [[Definition:Marine insurance]]
{{Div col end}}

Definition:Salvage (insurance) - Revision history

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