In the world of motor insurance, where promises of comprehensive coverage and peace of mind often collide with the unexpected, the curious case of salvage deduction leaves many policyholders scratching their heads.
For the uninitiated, salvage is the value of damaged or destroyed property that can be recovered and sold after an insurance claim has been settled.
You pay a bomb for comprehensive motor coverage. Add to it the costs of add-on covers and you are literally paying through the roof. The least you would expect in lieu of such payment is your claim to be settled in full, wouldn’t you? But that is not the case. Especially when salvage is involved.
Operationally speaking, salvage is the Insurer’s property, once they settle a claim. But managing salvage – collection, storage and disposal at the right price – is a headache for the Insurer.
About a decade back, Insurers used to retain salvage and dispose it, as and when they could. But since this – disposal of salvage, was not the Insurer’s main job, such salvage kept accumulating with the Insurer. Overtime things came to a point where Insurers’ would need warehouses just to store this salvage. And things got unmanageable.
So Insurer’s decided to stop retaining salvage.
Nothing happened for a while and until Insurers started asking Customers monies to dispose of the salvage. Today, it has more or less become an industry norm. An unwritten one at that.
The Insured could now either take away the salvage with him or pay the Insurer to dispose it off. The hapless Insured who did not have the means or the bandwidth to deal with disposal of salvage was left with no choice but to allow the Insurer do it for him.
But the Insurer does not do it for free. The Insurer charges you a percentage of the claim settlement amount to deal with this salvage. This percentage is called salvage deduction.
A deduction, that the Insurer charges you, in lieu of taking care of the salvage for you.
The sad part is that this deduction could be as high as 10% of the claim amount.
But, here’s what you, the Customer, should think about
- The salvage belongs to the Insurer, once they settle a claim. Why should you need to deal with it?
- If indeed the Insurer is abiding by the terms and conditions of the policy, which clause under the policy allows them for such a deduction?
In the absence of credible answers to such questions, here’s how you can deal with such situations
- Get a note of declaration from your Broker or the Insurer, that salvage would not be deducted from the claim amount.
- Ask the Insurer to get the value of salvage determined by a third party/ independent Valuer.
- And ofcourse, if nothing works, approach the Ombudsman.
For more information on Motor Insurance, please book a call with our motor insurance experts at Ethika insurance broking.
