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Insurance for a salvage car

USA, South Carolina, Old car in abandoned repair garage
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Whether you have been browsing used car ads for the best deal or you purchased a new car fresh off the lot, getting car insurance is likely one of the first steps of owning a car. While insuring a new or used vehicle is a relatively simple process, many people wonder if insuring salvage cars is just as simple. A car receives a salvage title once it has been declared a total loss by an insurance company, which typically happens if the total loss threshold of expected repairs exceed the vehicle’s actual cash value. Although the threshold varies by state, physical damage claims cost insurance companies over $62 million dollars in 2019, alone.

You may be tempted to buy a salvage title car for the cheaper price tag, especially if you do not drive very often or if you have a background in auto repair. You may even own a vehicle that recently received a salvage title that you wish to fix up and continue driving. Either way, if you plan on driving a salvaged vehicle, you need to carry insurance on that car. Although it is more difficult to find insurance for a salvaged vehicle, it is not impossible.

What is a salvage title car?

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 has been damaged to the point that the cost of repairs would be more than the actual car is worth. Although legal specifications vary by state, a salvage certificate is typically issued at this point and simply means the vehicle is a total loss and has not yet been repaired. 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) for 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% of the vehicle’s value and thus exceeding the total loss threshold (which varies by state).

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.

Can a salvage title car be insured?

Obtaining insurance on a salvage 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 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.

Steps to insure a salvage title vehicle

If you plan on purchasing a salvage title vehicle, you may follow these steps to obtain insurance:

  1. Inspect the salvage vehicle: Thoroughly examine the vehicle’s exterior and inte and make note of any obvious repairs or damages for your own records.
  2. 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.
  3. 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.
  4. 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.
  5. Shop for coverage: Once your vehicle has a rebuilt title, you could begin shopping for coverage at different auto insurance companies. Most companies will 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 insurance on a salvaged title car, you are generally still able to make 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.

Written by
Jessie See
Insurance Contributor
Jessie See has a year of experience writing for Bankrate, and other insurance domains. She has covered topics ranging from auto and homeowner’s insurance to life insurance. She has been writing professionally for over a decade with experience in a variety of different topics and industries. Prior to becoming an insurance writer, she worked as a legal assistant in the field of personal injury law and as a licensed sales producer at various insurance agencies.