What does Abandonment and Salvage mean?

It is a term with legal connotations used to express the situation when a property is being asserted by the contracting party, under the condition this very property has been abandoned by the owner of the contract. Abandonment and Salvage can constitute an important provision of an insurance policy, but only if it is requested. An important fact is that the present stipulation is most often constituent part of a Marine Insurance, and it is less covered by other types of insurances.

Abandonment and Salvage explained

In order to somehow exemplify it, Abandonment and Salvage enters into force in the case of disaster at sea. When a ship suffers an accident to the extent it cannot continue its route, the owner might either support the costs of these damages himself, or simply accept the Salvage and Abandonment clauses displayed in the insurance.

As it is suggested by the name of the term, abandonment is the practice which should be undertaken, in order for the clause to really enter into force. The reasons for such abandonment could be many. For example, the owner goes through such a financial crisis it is simply not worth to further invest in the ship's rescue; or, the owner considers that the investment he would have to make in order to save the ship and its cargo is almost equal to, or goes much beyond its real value.

In case such abandonment by the owner occurs, salvage enters into force as well. Salvage simply means that the assurance company will further gain the full rights over the respective ship, but it is very important to underline the fact that the insurer does not have to fulfill the task of salvaging rights, in an obligatory sense. It is totally up to the company's will whether to proceed to salvaging rights or not.