Other Than Life (OTL) Practice Exam

What happens to salvage after a claim has been paid?

1. It always belongs to the insured

2. It consists of the useless debris of a total loss

3. It may be negotiated between the insured and the insurer

4. It belongs to the insurer when the claim has been paid

The correct answer is: It belongs to the insurer when the claim has been paid

When a claim has been paid, salvage typically belongs to the insurer. This is based on the principle that once the insurer has compensated the insured for a loss, they assume ownership of any remaining property that is salvageable. This allows the insurer to recover some of their losses by selling the salvageable items. By retaining ownership of the salvage, the insurer can manage the residual value of the property, which could reduce the overall loss they incurred from the claim. In contrast, the other possibilities do not accurately reflect the usual practice regarding salvage. While the insured may have a role in negotiating what happens to the salvage before the claim is settled, it ultimately defaults to the insurer as a standard practice once payment is rendered. Additionally, salvage is not merely "useless debris" since there may still be value in items deemed salvageable after a loss.