Abandonment Clause

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Paul Tracy

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Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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Updated September 30, 2020

What is an Abandonment Clause?

An abandonment clause is a provision in an insurance contract that ensures full compensation in the event of abandonment.

How Does an Abandonment Clause Work?

For example, suppose a company has an insurance policy on a machine, and the machine is damaged to such an extent that it is not worthwhile to pay for the repairs. The company may abandon the machine and collect on the insurance policy via the abandonment clause.

Why Does an Abandonment Clause Matter?

If the owner of an insured asset or property chooses to abandon it, an abandonment clause ensures that the insurer will pay the full coverage amount if the asset or property has damage that exceeds the asset's market value.

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