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Simple English definitions for legal terms
salvage loss
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A quick definition of salvage loss:
Salvage loss is when something loses its value unexpectedly or gets destroyed. This can happen because of accidents, natural disasters, or other unexpected events. When something is insured, the insurance company may have to pay for the loss. If something is sold for less than it was bought for, that is also considered a loss. Sometimes, the loss is so big that it cannot be fixed, and the thing is considered a total loss.
A more thorough explanation:
Definition: A salvage loss is an undesirable outcome of a risk that results in the disappearance or reduction of value, usually in an unexpected or unpredictable way. In insurance, it refers to the amount of financial detriment caused by an insured person's death or an insured property's damage, for which the insurer becomes liable.
Examples:
- If a car is damaged in an accident and its value decreases as a result, the difference between its original cost and its later selling price is considered a salvage loss.
- If a house is destroyed in a fire and the insurance company pays out for the damage, the amount paid out is considered a salvage loss.
These examples illustrate how a salvage loss can occur when an unexpected event causes a decrease in value or financial detriment, resulting in a loss for the owner or insurer.