posted on 06-06-2019
Abandonment Clause
Updated October 1, 2019
What it is:
An abandonment clause is a provision in an insurance contract that ensures full compensation in the event of abandonment.
How it works/Example:
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 it matters:
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.