What is considered salvage in the context of automobile insurance?

In the context of automobile insurance, salvage refers to a vehicle that has been damaged to the extent that the cost of repairing it exceeds its actual cash value. When a vehicle is deemed a total loss due to severe damage, it is typically classified as salvage. The insurance company may take possession of the vehicle, pay the owner the total value minus any deductible, and then may sell the vehicle for parts or repairs.

This classification helps both insurers and policyholders understand the vehicle's worth after severe damage occurs, thus facilitating fair compensation and proper handling of the damaged asset. The method of determining salvage value is crucial in assessing how much of the vehicle can still be utilized or sold, as it informs the insurer's decisions regarding claims and reparative efforts.