Salvage: What is it & how does it affect a claim?

Salvage: What is it & how does it affect a claim?

Salvage is a basic principle of insurance.

Salvage simply means that once a claim for a damaged item has been paid, the insurer takes ownership of the item.  The insurer usually offers the damaged item for commercial sale to reduce its loss (ie the amount it paid to the claimant).

The practice of taking salvage for damaged items is most common in motor vehicle insurance claims.  When a car is written off and the insurer pays the claim, it takes possession of the damaged car and sends it to an auction facility or similar.  The proceeds from the sale of the damaged car are to the insurer’s benefit and offset the claim amount paid to the policyholder.

Although most common in motor vehicle insurance claims, salvage can occur in many other types of claims; eg household contents, business stock / inventory, machinery, marine and even travel insurance.

It is usually a condition within the policy that the insurer retains the right to ask the claimant to send damaged items to it upon request.  The reasons for this are twofold.  The first is that the insurer may wish to inspect the item to verify the damage and also to determine if it is repairable.  The second reason is that if the item is irreparably damaged and the value of the item paid to the claimant, the insurer may look to offset its loss by offering the item for sale.

In terms of travel insurance, the most likely items an insurer may consider for salvage include electronic devices such as laptops, tablets, cameras and mobile phones.  This is because even though the item pay be irreparably damaged, it still has a commercial value for parts.  Salvage may be considered for any type of property (not just electronics).  If the insurer considers the damaged item has any realizable value, it will consider the salvage potential.

If when settling the claim, an insurance company pays the value of a damaged item, they are within their rights to take possession of it.  However, the insured party has first option on any salvage.  This means that if you want to retain the item, you can make a salvage offer to the insurance company.  If the company accepts your offer, you get to keep the item in addition to the claim payment.

Whilst an insurer retains a right to the salvage if they pay your claim, they wont always exercise it.  If they do, you are legally obliged to comply with their request to hand over the item as part of the claim settlement process and terms of the insurance policy.

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