Registered Insurance Brokers of Ontario (RIBO) Practice Exam

What is 'Salvage Disposition' in the context of insurance?

1. A mandatory process for all claims

2. Disposition can be negotiated between the insured and the insurer

3. A fixed amount set by the insurer

4. It refers to auctioning damaged goods

The correct answer is: Disposition can be negotiated between the insured and the insurer

Salvage disposition refers to the process by which the insured and the insurer negotiate what happens to damaged property after a loss occurs. This typically comes into play when a claim is made after an insured event, such as an accident. The goal is to assess the salvageable value of the damaged property and decide whether the insured wishes to retain it or allow the insurer to take possession. Negotiation in salvage disposition is crucial because the insured may have preferences regarding the handling of their property, and the insurer may have policies regarding salvage rights. Ultimately, this mutual agreement can lead to a more tailored solution that meets the needs of both parties, including potential financial considerations or the option of repair versus total loss. The other choices do not accurately describe salvage disposition. A mandatory process for all claims doesn't apply since salvage is situational and not required for every circumstance. A fixed amount set by the insurer would imply lack of negotiation and flexibility, which is contrary to the nature of salvage deals. Lastly, while auctioning damaged goods is sometimes a part of the salvage process, it does not encompass the entire concept of salvage disposition, which includes the negotiations and agreements between the insured and the insurer regarding the fate of the damaged property.