What is a Salvage Title Car & Can You Insure One?
You’re a champion bargain hunter. You buy consigned clothes and refurbished electronics — so why not a salvage title car?
Salvage vehicles can be supremely cheap. However, they can be expensive to insure. Here’s everything you need to know about obtaining insurance for your salvage title car.
What Is a Salvage Title?
A salvage title vehicle has sustained significant damage, been written off by the owner’s insurance company, and then been assigned a salvage title before it’s offered for sale.
When a vehicle gets totaled in an accident, stolen and stripped, or damaged by flood, hail or another natural disaster, the owner’s insurance company may decide it’s too expensive to repair. This is called a total loss, and the legal definition varies by state. In many states, a vehicle is considered a total loss if the car’s actual cash value is equal to, or less than, the estimated cost of repairs plus the vehicle’s value if sold for scrap. In total-loss situations, the insurer writes a check for the car’s value to the owner. Now the insurance company owns the car, which is given a salvage title.
These salvage title cars are often sold at auction for really low prices. On sites such as Copart and Erepairables, you can browse salvage title cars from all over the country. You might see a nice-looking Aston Martin DB9 Volante going for just $3,000, but don’t get too excited! Read the fine print and you’ll see that it has water damage, and the engine won’t start. Also, in some states, you may need to go through a broker to buy a salvage title car unless you’re a dealer/dismantler or have another required business license.
Many salvage cars truly are beyond repair, so people buy them for parts. Others may be good candidates for fixing up if you have the time, money and expertise. A salvage car that has been repaired to be roadworthy is called a rebuilt title car. These cars can be just fine to drive, but be aware that there’s no way to turn a rebuilt title into a standard title. The “rebuilt” label will always be there, which can impair the resale value.
Can You Get Insurance On a Car With a Salvage Title?
In most states, the answer is no: You can’t get salvage title insurance, because it’s not legal to drive a salvage car. Some people get around this by illegally tampering with the title, or reselling a salvage car in a state with less strict title standards. (This is called “title washing,” and it can be detected by running a vehicle history report when you purchase a car.)
But what if you’ve already purchased a salvage-title car, and you need to insure it? Here’s a common scenario: Your older BMW was T-boned in a collision, and the insurance company says it’s a total loss. But you really love that car, so you offer to buy it back. Your insurer will write you a (probably small) check for the actual cash value of the car, minus your collision deductible, minus the salvage value. Now, you’ve got to find insurance for your salvage-title car.
To make that happen, you need to get it fixed. Once your car has been repaired and can pass inspection, you should be able to change the salvage title to a rebuilt title. Can you get insurance on a car with a rebuilt title? Yes! But it may be more expensive, and you’ll have to shop around.
What Insurance Companies Cover Salvage Titles?
Searching for salvage title insurance? Once your car has earned a rebuilt title, many insurers will be happy to sell you liability insurance (the part that covers bodily injury and/or property damage to others in an at-fault accident.) Even then, warns Lynne McChristian of the Insurance Information Institute, you may pay more for car insurance than you would for a clean title. “Keep shopping around,” she says. “It’s a competitive market.” To shop for liability-only insurance on Compare.com, just select “state minimum policy” and compare your personalized quotes.
The tricky part is getting collision/comprehensive coverage — the part of your insurance that covers damage to your car. Because salvaged vehicles can have hidden problems, insurers are often reluctant to cover them. If they do cover your rebuilt title car, your policy will probably limit the payout in case of a claim. Here are a few insurance companies that will cover rebuilt title vehicles:
- Allstate may offer rebuilt-title insurance.
- Geico offers full coverage on rebuilt title cars but may require extra inspection.
- Progressive offers liability insurance for rebuilt title vehicles.
However, you shouldn’t assume that other insurance companies won’t insure you and your salvaged car! Here’s what we recommend: Get your quotes on Compare.com. Click to contact the insurance company, and ask about your rebuilt title. It may help if you can provide documentation that your car has passed inspection and is safe to drive. If it received a salvage title for cosmetic damage, not major structural damage, that can be a plus as well. Shop around, and you’ll find a good deal.