Can I buy car insurance for a Salvage Titled car?
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UPDATED: Mar 13, 2020
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A salvage title denotes that a vehicle has been substantially rebuilt. This is often caused by the auto having been involved in an accident that caused enough damage to make the vehicle considered a total loss. Totaled vehicles are sold at auction to be used as parts or for people to rebuild; some people buy back a car from the insurance company after it’s been totaled. Salvage vehicles are often very affordable and may be totally reliable, but insuring them can sometimes cause difficulties.
What is a Total Loss?
Any time a vehicle would cost more to repair than it is worth, the vehicle will be considered a total loss. For older vehicles, fairly minor or cosmetic damage can lead to a vehicle being totaled. For example, a 10 year old car with hail damage will almost certainly be totaled by the insurance company, despite the car being totally drivable. In other cases, vehicles that obtain certain types of structural damage may be totaled regardless of the car’s value. Bent frames can be extremely difficult to repair and the vehicle may never drive the same way afterward, so cars that sustain this kind of damage are often totaled.
Whenever someone files a claim for damage, the vehicle will be inspected. If the inspection reveals that the vehicle will be irreparable either physically or financially, the insurance company will offer a total loss settlement based on the actual cash value of the car. The insured then has the choice of taking the full amount of the settlement, or retaining the salvage rights to the vehicle and taking a lesser settlement. Essentially, the insured buys back the vehicle from the insurance company at a reduced price. If the insured does not buy back the vehicle, it will be taken to a salvage yard and auctioned off.
Why buy a Salvage Title Vehicle?
Any vehicle purchased from a salvage yard will have a salvage title. Additionally, a vehicle that has been substantially rebuilt will require a salvage title. What constitutes “substantially rebuilt” may vary from one state to the next, so it’s always a good idea to research this prior to purchasing a vehicle.
Cars with salvage titles are very inexpensive. For owners with substantial vehicle knowledge, they can be a good restoration project and can be repaired to excellent condition regardless of their initial state. Unfortunately, the value of a salvaged vehicle is uncertain, and it’s hard to determine exactly what such a car is worth. Excluding certain collector’s cars that can be appraised, a salvaged vehicle will often not be worth the cost of its repair.
Insuring a Salvaged Vehicle
Buying car insurance on a salvaged vehicle is not impossible, but it is more difficult than buying insurance for another type of used car. Because the vehicle’s worth is uncertain, there may be a discrepancy between the value of the vehicle and its cost to insure. For example, the vehicle might be insured at the market value of a non-salvaged vehicle of the same year, make and model; if the salvaged vehicle is involved in a claim, however, the payout may be extremely low.
Because a settlement was already offered on the vehicle, the insurance company may deem a salvaged vehicle as worthless. This means that they will not pay for any further repairs caused to the car. Always be sure to check with the insurance company before choosing policy coverage to confirm exactly what can be paid if the car is involved in an accident.
The safest way to handle insurance coverage for a salvaged car is to carry a liability-only policy. This will be less expensive than full coverage auto insurance. Since the insurance company might not pay for the vehicle to be repaired after an accident, collision and comprehensive coverage are an unnecessary expense for most salvage-titled vehicles.
It’s important to be honest with the insurance company when insuring a vehicle with a salvage title. This will ensure that the appropriate coverage is placed on the car and that claims will pay out the way you expect them to. If the car insurance company refuses to provide coverage for this type of car, it may be necessary to pursue insurance through another provider. Car insurance providers who specialize in high-risk and exotic car coverage are a good place to start when shopping for a company to provide insurance on a salvaged car.