Typically, the abandonment clause comes into effect when the property is deemed a total loss by the insurance company. This can occur when a vehicle is totaled, or when a boat sinks and the salvage process costs more than the vessel and goods inside are worth. For instance, if your home suffers substantial damage from a tornado, you might want to sign the house over to the insurance company and make a fresh start somewhere else. But if the insurance company opts to repair your home instead, you don’t have the option of signing it over and letting them take possession. It is then your responsibility to ensure that the repairs get done.
How Does an Abandonment Clause Work?
There are some situations when it doesn’t make sense to repair the property. Usually, this occurs when the costs to repair the property are more than the property’s actual value. Under most circumstances, you can’t simply abandon your property, sign it over to the insurance company, and expect a full settlement. Instead, your insurance company may grant you permission to abandon the property and relinquish your rights. The repair or disposal of your property is typically still your responsibility. Let’s say you get into a wreck and your car receives substantial damage. Your insurance company may decide it’s totaled. Usually, this means the damage is so severe that it’d cost more to repair it than the car is worth. If this happens, you can work with your insurance company to sign the title over to them. Then, you receive a total-loss settlement, and the company disposes of the vehicle according to state law. Once you sign over the property to the insurance company, you no longer have a claim to the property. This means if the insurance company sells the salvageable parts from your car, it gets to keep the money without giving any of it to you.
How Does an Abandonment Clause Affect You?
An abandonment clause prevents you from getting an insurance settlement by simply walking away from property that you no longer want. It also provides a way for insurance companies to decide to allow abandonment if it’s determined the cost of repairs would be more than the item is worth. Work with your insurance company when you file a claim for damaged or lost property. Your insurance adjuster or claims examiner can help you navigate the process and determine if there’s been a total loss.
