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Abandonment Clause (Insurance)

Last updated 29th Nov 2022


The term abandonment clause refers to an insurance contract that permits the owner to abandon damaged property and still receive a full settlement amount. Abandonment clauses provide insurance policyholders with the option of using the proceeds from their claim to repair the damaged asset, or abandon the property and still retain the settlement.


Property insurance policies can include what is known as an abandonment clause, which allows the policyholder to abandon the damaged property and still receive their claim settlement. Once abandoned, the damaged property is owned by the insurance company. Abandonment clauses are more common in marine property insurance policies. Homeowners policies typically prohibit policyholders from abandoning property under any condition.

Policyholders oftentimes evoke this clause when the cost to recover or repair the property is greater than the value of the insured property or the damage results in a total loss. For example, a boat may be lost at sea and rather than undertaking an expensive effort to recover the vessel, the policyholder can abandon the property and still collect the coverage owed within their policy.

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Moneyzine Editor

Moneyzine Editor