A salvage title car is one that has been declared a total loss by an auto insurance company
Salvage title cars need to be restored to the rebuilt title status before they can be eligible for car insurance
Most insurance companies will only offer liability coverage for rebuilt title cars, and will not extend insurance to cover the vehicle itself
You may be able to buy a salvage title car at a bargain price, but you’ll probably have a hard time insuring it. Salvage title vehicles are those that sustain significant damage after an accident and have been declared a total loss by the previous owner’s insurance company.
Before a salvage title car can be eligible for insurance, it must be restored to rebuilt title status. Rebuilt title cars are salvage vehicles that undergo repairs and are restored to drivable condition. Not all salvage title cars can be easily repaired, though, and some types of damage are less apparent than others, posing an invisible threat to drivers.
Most insurance companies are not willing to offer insurance for the car itself, meaning you won’t be able to get comprehensive and collision insurance for a former salvage title car, but some companies will offer liability coverage to protect you financially if you cause an accident.
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A salvage title car describes a vehicle that was previously deemed a total loss by an insurance company, and is being resold. In most cases, a salvage title car has been totaled in an accident. A total loss means that the cost of repairing the vehicle exceeded a certain percentage of its actual cash value(ACV).
Some states have a total-loss threshold which is a percentage of the car’s pre-crash value that determines whether it must be declared a total loss. Say your state’s total-loss threshold is set at 75%; if repairing the damaged vehicle would cost more than 75% of the car’s actual cash value (ACV), then it would be considered a total loss and might be resold as a salvage title vehicle.
Salvage title vehicles are confirmed through a title certificate, or a legal document issued by a state DMV or equivalent office, which establishes the owner of the vehicle and the vehicle’s history.
Since they are often resold at auction, you may be able to find a salvage title car for an affordable price, but they cannot be driven until they’ve been repaired. A salvage title vehicle that is purchased and repaired is referred to as a rebuilt title car. Rebuilt title cars are essentially salvage title vehicles that pass a state inspection after being restored to drivable condition.
It may be difficult to finance a salvage or rebuilt title car because many lenders will not want to take a stake in it. If you’re looking to secure a loan for a salvage title vehicle, try visiting a small bank or local credit union with whom you already have a relationship (a high credit score can help you make your case). If acquiring an auto loan doesn’t work out, you can also try taking out a personal loan to finance your salvage title vehicle, but keep in mind it’ll cost you more.
Your insurer may consider your car a total loss if it cannot be repaired safely, or the costs of repair exceed a percentage of the car’s actual cash value.
If you have comprehensive and collision coverage, your insurance company will cover the repair costs to your vehicle after you’ve been in an accident or after your car has been damaged by a factor outside of your control (like a fallen object, civil disturbance, or natural disaster). The same is true if your car is totaled, if you have comp and collision coverage, you’ll be paid out the ACV of the totaled vehicle, which is the value of your car accounting for depreciation, wear and tear. If you don’t have comp and collision coverage and you total your car, you won’t be paid out for its value.
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In order to insure a salvage title car, you'll need to get it to the rebuilt title status. A rebuilt title car may still be difficult to insure because many insurance companies will not sell you a policy, or they’ll only offer certain coverages at higher rates than a standard policy.
Car insurance is required in almost every state, so before you get behind the wheel of your rebuilt title car, you should find a car insurance company that is willing to write you a policy first — you should shop around to find a carrier that will offer you coverage. You may also have the option to add your rebuilt title car to an existing policy if you already have a car insurance provider.
If you are able to successfully insure your rebuilt title car, your coverage may be limited to liability insurance which covers the costs you incur when you cause an accident and hurt someone else or damage their property. Your rebuilt title car may not be eligible for comprehensive or collision coverage which would protect the car itself. You may also see higher rates for a rebuilt title car than you would for a car without a history of extensive damage.
Salvage title vehicles are riskier to insure because they come with a history of severe damage and prior claims. Adding a salvage title car to your policy could raise a red flag to car insurance companies, letting them know you’re more likely to file a claim for this vehicle given its potentially compromised state.
There are some types of damage that may not be fully apparent, even if the car has been restored to rebuilt title status. If the car had previously been stolen, missing parts may cause ongoing problems, if it was in a flood or otherwise damaged by water, things may appear fine but still affect the car’s safety and drivability. That’s why insurance companies see rebuilt titled cars as more of a risk — and why you should have a trusted mechanic look over a rebuilt title car before you purchase.
Full coverage insurance includes liability coverage, comprehensive coverage, and collision coverage. A full coverage insurance policy will protect you and others in an accident, no matter who was at fault, as well as cover damage to your car if it collides with an external object or is damaged in a non-driving peril.
|COVERAGE TYPE||WHAT IT DOES|
|Bodily injury liability||The part of your liability coverage that pays for medical bills if you've injured someone in an accident|
|Property damage liability||The other part of liability coverage, covers the cost of property damage you've caused in an accident|
|Personal injury protection||Covers medical expenses for you or your passengers after an accident|
|Uninsured/underinsured motorist||Covers the costs if you're in an accident caused by a driver with little or no car insurance|
|Comprehensive||Covers damage to your car that happens when you're not driving|
|Collision||Covers damage to your car after a car accident, no matter who was at fault|
An insurance company that’s willing to cover your rebuilt title car may not offer you comprehensive and collision coverage, so you probably won’t be able to get full coverage insurance for a salvage or rebuilt title vehicle.
Stephanie Nieves is an insurance editor at Policygenius in New York City, specializing in auto and home insurance. She's been writing about insurance, finance and financial planning since 2018, and loves helping readers get the knowledge they need to make financial decisions with confidence. Her words can also be found on PayScale, Fairygodboss, and The Muse.
Stephanie has a B.A. in writing and rhetoric from Hobart and William Smith Colleges.
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