Salvage Recovery
The process by which an insurer recovers value from damaged property it paid for in a total loss, typically by selling the salvaged asset.
industryPublished 2026/06/07Last verified 2026/06/07
FAQs
- Does the policyholder have a right to keep their salvaged vehicle?
- In most states, a policyholder may retain the salvaged vehicle by accepting a reduced settlement equal to the total loss value minus the expected salvage value. This is called a retained salvage or buyback arrangement.
- How does salvage recovery affect the insurer's loss ratio?
- Salvage proceeds are netted against paid losses, reducing incurred losses and improving the loss ratio. Higher salvage recovery rates directly reduce the carrier's indemnity expense ratio on total loss-heavy lines.
- What happens to salvage proceeds under a reinsurance treaty?
- Under proportional treaties, salvage recoveries are typically shared with the reinsurer in proportion to their participation. Under excess-of-loss treaties, treatment varies by contract language — salvage may reduce the ceding carrier's net retained loss before treaty attachment.
Related Terms
Indemnity Expense Ratio
The ratio of claim indemnity payments to earned premium, measuring how much of each premium dollar is paid out as loss settlements.
Claims Leakage
Measurable overpayment on claims relative to the theoretically correct settlement, resulting from process failures, errors, or inadequate investigation.
Case Reserving
The process of establishing a specific dollar reserve for an individual open claim, representing the estimated total cost to resolve that claim.
Catastrophe Claims Response
The organized deployment of adjusters, vendors, and triage protocols to manage a surge of claims following a natural disaster or large-scale loss event.