What is meant by "Salvage Value" in the context of insurance?

Salvage value refers to the estimated value of property or goods that can be recovered or salvaged after they have been damaged. In the context of insurance, this term typically applies to the amount that the insurer expects to recover from the damaged items once they are disposed of, repaired, or sold. This value is crucial for understanding the overall loss from an insured event, as it helps determine the net payout from the insurer following a claim.

This concept highlights how insurance companies assess the situation after a loss occurs. By evaluating the salvage value of the damaged property, insurers can deduct this amount from the total loss claimed, which ultimately influences the payment made to the policyholder. Thus, identifying the salvage value helps in reflecting a more accurate financial outcome for both the insurer and policyholder.