If you’re looking to buy a cheap car, you might consider buying a vehicle with a salvage title. Salvaged cars are usually far less expensive than new or other used vehicles, but buying insurance for a car with a salvage title can be hard. Understanding what a salvage title indicates, and how it will impact your insurance options, is important if you’re considering buying a car that was previously totaled. Bankrate’s insurance editorial team breaks down what it all means so you can decide if it might be the right move for you.
What does salvage title mean for insurance?
A salvage title car is a car that has been declared a total loss by an insurance company. To be declared a total loss, the vehicle must be damaged to the point that the cost of repairs would be more than the car is worth.
Although legal specifications vary by state, a salvage certificate is typically issued when the insurer deems a car totaled. When this happens, an insurance company usually takes possession of the vehicle and sells it to a mechanic or other party who will then use it for parts or repair it for resale.
Although it is not always the case, if you are purchasing a salvaged car from a dealer, it has probably been issued a rebuilt title, meaning it has already been fixed and inspected for use on a public road. If you are purchasing a salvaged car from an auction, it may still need repairs and it is important to verify with your state’s Department of Motor Vehicles (DMV) what is required to get the vehicle road safe.
Either way, a salvage title will be required because it lets potential buyers know that the car has suffered extensive damage in the past or has been declared a total loss by an insurance company. A vehicle may be totaled if:
- The vehicle has been in an accident that requires repairs exceeding the actual cash value of the vehicle.
- The vehicle has been damaged in a weather event, such as a hurricane, and the cost of repairs exceeds the actual cash value of the vehicle.
- The vehicle has been vandalized and the cost of repairs exceeds the actual cash value of the vehicle.
- The vehicle has been damaged to the point that it is inoperable and unsafe without complete body and frame repairs—usually costing beyond 70 percent of the vehicle’s value and thus exceeding the total loss threshold (which varies by state).
Can you get insurance for a salvage title?
Obtaining insurance for a salvage title vehicle may be difficult because each insurance company will have its own policy on insuring salvage cars. Once a vehicle has been fixed and inspected for safety, it may qualify for a rebuilt title, which usually allows you to obtain your state’s minimum liability coverage.
However, some insurance companies may refuse to provide collision or comprehensive coverage because those types of coverage pay to repair the insured’s vehicle after an at-fault accident or other incidents and they consider a salvage vehicle risky to insure. If a company is willing to provide physical damage coverage, an adjuster may ask to evaluate the car and require you to provide detailed information on the prior damage. In addition, the insurance premium could be high while your vehicle’s value may be low.
How much is insurance for a salvage title?
If you’re looking to buy insurance for salvage title cars, you should take the time to shop around and compare quotes. Keep in mind that insurers usually won’t offer comprehensive or collision coverage for salvage vehicles, so you’ll likely only be getting minimum coverage.
Despite this, insurance for a rebuilt title or salvage car could be more expensive than for a typical vehicle. Salvage cars can have issues that weren’t discovered and fixed when they were being repaired to road-readiness, and those issues increase the risk of further accidents.
The national average cost for minimum coverage auto insurance is $622 per year, so you can expect to pay a bit more than that to insure a salvage car. You may be able to save money by accepting a higher deductible or by qualifying for discounts, such as bundling your auto policy with home insurance or taking a defensive driving course.
Steps to insure a salvage title vehicle
If you plan on purchasing a salvage title vehicle, you may want to follow these steps to obtain insurance:
- Inspect the salvage vehicle: Thoroughly examine the vehicle’s exterior and interior and make note of any obvious repairs or damages for your own records.
- Take photos of the damaged vehicle: In the event the vehicle is damaged in the future, photographic evidence of the condition the vehicle is in at the time of purchase could be beneficial.
- Get a certified mechanic’s statement: Hire a mechanic to complete a full inspection of your vehicle. Once repairs have been completed, ask the mechanic to provide a written statement ensuring the vehicle is in working order and considered safe for the road.
- Apply for a rebuilt title: When your vehicle has been repaired and you have a mechanic’s statement that it is road safe, you may apply for a rebuilt title through the DMV. Each state will have its own requirements, fees and application process.
- Shop for coverage: Once your vehicle has a rebuilt title, you could begin shopping for coverage at different auto insurance companies. Most companies will only offer liability insurance. If you want full coverage, you may need to shop around and compare quotes because it may be costly to obtain physical damage coverage on a previously salvaged vehicle. In fact, many companies refuse to offer full coverage because it is usually hard to determine a payout amount in the event of a future claim.
Can you make a claim on a salvage title car?
If you have car insurance for a salvage title car, you are generally still able to file a claim in the event of a future incident. However, whether the insurance company will pay out on that claim depends on the type of coverage you purchased. Most insurance companies will only provide liability coverage, which does not provide any physical damage coverage for your vehicle.
If you do have collision and comprehensive insurance, it may be important to understand that your vehicle’s value is likely substantially lower than a non-salvaged vehicle. Before making a claim, consider discussing the incident with your insurance agent to determine if the claim payout would be worth any consequences resulting from making the claim, such as an increase in your insurance premium.
Tips for buying a salvage car
If you are thinking about buying a salvage car, here are a few tips to consider before you make your purchase:
- Research your state’s specific laws when it comes to purchasing a salvage car, including lemon laws, title requirements and insurance requirements.
- Run the Vehicle Identification Number (VIN) through a service like CarFax to get detailed information on any prior damage or accidents.
- Hire a certified mechanic to inspect the vehicle and ask them to provide you with a full report on any damage, potential safety concerns, and a cost estimate for repairs.
Frequently asked questions
A vehicle is issued a salvage title when it is declared a total loss by an insurance company but can still be repaired and deemed safe to be on the road. A total loss can be a result of numerous issues, including damage from a motor vehicle accident or other issues, like fires or floods. An insurance company will deem the vehicle a total loss if its damage exceeds its actual cash value, an amount known as a total loss threshold.
It depends. The laws on salvage titles and rebuilt or restored titles will vary based on your state. The best way to determine whether you need to apply for a rebuilt title in order to drive your salvage vehicle is to speak to your local Department of Motor Vehicles. No matter what state you reside in, though, chances are that your vehicle will need to be repaired, inspected, and insured before it can be used legally on a public road.
No, you typically can’t get full coverage car insurance on a vehicle with a salvage title. Most insurance companies do not offer full coverage car insurance policies on vehicles that have been rebuilt, as it’s difficult to determine the actual value of the vehicle if there are subsequent claims made on it. However, it is always a good idea to shop around for coverage and see if there is an insurance company willing to work with you, which may be an option if your vehicle meets certain conditions.
Yes, a rebuilt title will affect your car insurance. Rebuilt cars are usually worth less than typical cars, limiting the amount of coverage you get, even if you find an insurer willing to offer comprehensive or collision coverage. You may also pay more for insurance due to the risk of undiscovered and unrepaired damage or problems with the vehicle.
Auto insurance for salvage title vehicles will generally be more expensive than the minimum coverage on a non-salvage vehicle. The price can vary from one insurer to another, so it’s important to shop around to find the best car insurance company for your situation. Keep in mind that, in addition to the condition of your vehicle, your car insurance rates will be based on multiple other factors, such as your driving record and claims history.