What does the right of salvage refer to in an insurance context?

In an insurance context, the right of salvage refers to the insurer's ability to retain ownership of damaged property after a settlement has been made. This means that once the insurer compensates the policyholder for the loss or damage incurred, the insurer has the right to take possession of the damaged property.

This practice allows the insurer to recover some of their losses by potentially selling or salvaging the damaged property for parts, recycling, or other uses. By exercising the right of salvage, insurers can mitigate the financial impact of payouts by reclaiming value from what might otherwise be considered a total loss.

The concept is particularly important because it balances the interests of both the insurer and the insured. While the insured receives compensation for their loss, the insurer retains a vested interest in the property that can help offset claims costs. This practice is common in property and casualty insurance, especially in cases of significant damage or total loss scenarios.