Hawaii Insurance License Practice Exam

When a claim has been paid, the insurance company retains salvage rights, which refers to the right to take possession of any damaged property that has been covered under an insurance policy. This allows the insurer to recover some of the losses they incurred when they paid out the claim. For instance, if a car is declared a total loss after an accident, the insurance company may pay the policyholder for the loss and then have the right to sell the salvaged vehicle for parts or scrap.

The retention of salvage is important for insurers as it minimizes their overall losses and can help them recoup some amount of the payout made to the policyholder. This is a common practice in various types of insurance, particularly in auto and property insurance.

The other options, while related to insurance, do not apply in this specific context of what remains after a claim is paid. Deductibles are amounts that the policyholder must pay out of pocket before coverage kicks in, premiums are the ongoing payments made for the policy itself, and subrogation rights allow insurers to seek reimbursement from third parties that may have caused the loss. However, in the aftermath of a paid claim, it is the salvage rights that the insurer retains as part of the recovery process.