A salvage title car is a vehicle that is so extensively damaged that the insurance company determines repairs would cost more than it is worth. Most insurance companies do not insure salvage title cars and offer minimum liability for rebuilt salvage cars.
Buying a salvage title car has several advantages. It is cheaper than a second-hand car and can be used for inexpensive parts. However, these cars usually cannot be used on the roads or get insured until they are rebuilt and approved after inspection.
What Is a Salvage Title Car?
A non-defective car that has never been involved in a serious accident or had its odometer removed carries a clean title.
When an accident happens, the insurance company is called to assess the damage and determine the extent of the damage. A salvage title car is one in which repair expenses would exceed pre-damage value.
There are several factors used to determine whether a car is a total loss. While different insurers use different calculators to compute total loss, a car is generally considered a salvage title if:
- The damage is too severe and not worth repairing
- The damage exceeds 60% but is not more than 90% of the car’s value
- The car was stolen and is unrecovered
A car that is declared salvage title is doomed for the scrapyard unless it can be repaired or rebuilt. Totaled cars that cannot be rebuilt are titled non-repairable and can only be used for parts.
If you purchase a salvage car with the intention of rebuilding it, the newly refurbished vehicle must pass inspection to get a rebuilt title. Once you have the rebuilt title, you can register, drive, and even sell the car.
A salvage title may be issued to:
- The insurer: In some cases, you might be eligible to buy back the salvage title from your insurance company. In this case, the insurance company will deduct the car’s salvage value from the settlement.
- The lienholder: The salvage title can also be issued to the lienholder or lender that financed the purchase of the car.
- The vehicle’s registered owner: If there is no lienholder or insurance company involved, the salvage title can be issued to the registered owner.
Salvage Title Car Insurance
As earlier discussed, a salvage title car cannot be insured because it is considered unroadworthy. Some salvage title cars are declared non-repairable, but others can be refurbished and given a rebuilt title once they pass inspection.
These rebuilt title cars can be insured. However, coverage varies from company to company. Where some carriers will not cover rebuilt title cars at all, others offer collision and comprehensive coverage at a higher premium.
In this case, payout after an accident may also be much lower compared to a car with a clean title.
Insurers are hesitant to provide coverage because it would be difficult to determine whether any damage is from the recent collision or from a previous accident before refurbishment.
An additional concern for insurers is that damaged cars are prone to break down in the future, which may result in expensive repairs.
Before buying a car, check its title status:
- A clean title is green
- A salvage title is blue
- A rebuilt title is orange
Many cars with a rebuilt title are restored to near factory settings. The downside is that it may be difficult to determine the rebuild quality, especially if you are unfamiliar with cars. These rebuild standards also vary from state to state.
When buying a rebuilt title car, be sure to get it inspected by your own mechanic, as some tests may be limited to the basic functionality of parts. Reconditioned cars may also have many refurbished parts, but these are not considered a problem if they are in good condition.
Getting Insurance for Rebuilt Title Cars
We recommend talking to at least three insurance providers in your search. Be prepared to pay more than the car is worth, as most insurers consider a rebuilt title a liability. Once you find a company willing to insure your rebuilt title car, you will need to provide the following:
Statement from a certified mechanic
This is a certificate verifying that the car is safe to drive and in good working condition.
Photos of the car
Some insurers will even ask for videos that are used to assess the damage before and after a collision in case of an accident.
A repair estimate details the damage before the rebuild and all the repairs made. It proves that the damages are adequately repaired for the car to be considered roadworthy.
While the process is not easy, with these documents, you may be able to purchase an insurance cover for your rebuilt title car. You will find that there are fewer insurance options available for cars with rebuilt titles, with certain providers charging more, resulting in higher premiums.
Coverage Options for Rebuilt Title Vehicles
Different insurers offer different insurance options for rebuilt title cars. Depending on the state you live in, you can get:
- Auto liability coverage
- Uninsured motorist coverage
- Medical payments or personal injury protection
As earlier discussed, most insurers will not offer comprehensive coverage for salvage title cars because of their previous accident history, which makes it difficult to tell between new and old damages. Insurers that offer coverage for rebuilt title cars charge higher premiums to cover any undetected problems.
While getting insurance for a rebuilt title car might cost you more time and money than it is worth. If you find yourself paying more in insurance premiums than you paid to purchase the car, it may not be worth the effort.
Clever Hacks When Buying a Salvage Car
Insurers and other auto service providers generally advise against buying a salvage title or rebuilt title car. This is because you are unlikely to know what problems the car might have, which makes it a gamble.
There are also fraudsters who often try to sell quickly patched-up cars that are unsafe to drive in what is commonly referred to as title washing. The sellers illegally alter a car’s title to conceal its salvage title status, which you may not discover until it’s too late.
It may be better to buy a car with a clean title, but it is certainly cheaper to purchase a car with a rebuilt title. If you are in a bind and need to buy a cheap car with a rebuilt title, here are some tips to avoid trouble.
- Buy from a reputable dealer.
- Visit the National Insurance Crime Bureau to get the car’s history report through the VINCheck service.
- Get an inspection certificate from a certified mechanic.
- Request the vehicle’s maintenance records.
- Take note of any heavy smells such as cleaning products which means the seller is trying to mask a problem such as a mold caused by water damage.
- Check for water stains, sand, mold, or silt residue, which might indicate that the car was flooded.
- Ask about the car’s damage history.
- Do not buy a car if the seller cannot give you the vehicle history or reveal its totaled status.
Companies That Offer Insurance for Rebuilt Titles
The following companies insure cars with rebuilt titles:
- 21st Century
- State Farm
- MetLife (liability only insurance)
- GEICO (full coverage with additional inspection requirements)
Keep in mind these insurers might offer coverage for some states and deny others. The companies may also require additional information to offer coverage and, in some cases, only offer liability coverage.
Contact each of these companies to compare quotations and get the policy that best suits your needs.
Need More Information About Getting Insurance on a Salvage Title Car?
If you are thinking about buying a vehicle with a salvage title, it is important to remember that it cannot be insured unless it is refurbished and tested for roadworthiness. While rebuilt title cars can be insured, most companies only offer liability coverage.
Companies that offer comprehensive coverage for rebuilt title cars charge high premiums that may be more expensive than the cost of the vehicle. We recommend that you visit several insurance companies to find the most affordable deal.
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