If a car is damaged beyond economic repair and sold for scrap after an insurer pays the loss fully, who retains the salvage value?

When a car is damaged beyond economic repair and the insurer pays the policyholder for the loss, the insurer typically retains the salvage value of the vehicle. This is because the insurer has compensated the policyholder for the total loss of the vehicle, and therefore, they acquire the rights to any remaining value that can be derived from the vehicle, such as selling it for scrap.

The concept of salvage value is rooted in the principle that, after covering the loss, the insurer may assume ownership of the damaged property to seek reimbursement through the sale of that property. By retaining the salvage value, the insurer can help offset the costs of the claim it has paid out to the policyholder.

In scenarios where the policyholder retains the salvage, it would generally be due to specific policy terms allowing such an arrangement, or if the insurer and policyholder had agreed on the disposition of the salvage. However, in the standard practice when a vehicle is declared a total loss, the insurer typically retains the salvage. This ensures that the insurer is able to recoup some of their expenses, and it aligns with industry practices regarding total loss settlements.