You may have considered buying a salvage vehicle if you are looking to save a substantial amount of money on a vehicle purchase, or wondered whether you can avoid replacing a vehicle that has been deemed a total loss by repairing it instead. But while you may be able to repair and drive a vehicle that has previously been totaled, insuring it could present some challenges. It is certainly possible to insure a vehicle that has been salvaged, but it may be more trouble than it is worth.
Learn how salvage title insurance works and consider some of the important pros and cons before deciding to get your salvage title vehicle insured.
What is a Salvage Title?
When a vehicle is declared a total loss (also known as being totaled), it becomes a salvage vehicle and receives a salvage title. A vehicle is typically considered a total loss when it is not repairable or the cost of repairs exceeds a certain percentage of the vehicle’s actual cash value (ACV). For example, many insurers declare a vehicle a total loss if repair costs exceed 70% to 90% of the vehicle’s resale value. States typically set the legal thresholds for when an insurer must declare a vehicle a total loss; for instance, the threshold in Oklahoma is 60%, while the threshold in Florida is 80%. In contrast, a clean title is a vehicle in legal condition to drive and has not been declared a total loss. Unlike a salvage title, a clean title has no restrictions placed on it and is used to demonstrate legal ownership of the vehicle.
A salvage title allows the vehicle to be sold to a salvage yard or to an individual who wants to rebuild it or use it for parts. However, a salvage vehicle cannot legally be driven on public roads, and you cannot insure it. However, sometimes salvage vehicles can be rebuilt to the extent where they are considered road-worthy again. As long as it meets safety standards and passes qualification tests, a salvage vehicle can receive a rebuilt title, which allows it to be legally registered, driven on public roads, insured, and sold.
Salvage Titles vs. Rebuilt Titles
While the terms “salvage title” and “rebuilt title” are sometimes used interchangeably, they are very different. A salvage title is issued on a vehicle that has been declared a total loss. The purpose of a salvage title is to allow the vehicle to be sold to a salvage yard for parts or to a private buyer who wants to use it for parts or rebuild it. It is not legal to drive a vehicle with a salvage title on public roads, and you cannot purchase insurance for salvage title vehicles.
A rebuilt title is issued after a vehicle meets minimum standards and is considered roadworthy. The process for receiving a rebuilt title varies by state. However, the owner typically needs to submit several documents to the state’s compliance examiner to prove that the vehicle has been properly restored. These may include:
- Legal statements from the mechanic who completed the repairs
- Receipts for major replaced components
- Photographs of the vehicle before and after it was rebuilt
In addition, you may need to submit proof of ownership of the vehicle, an application for a certificate of title, and additional fees and taxes. Once the inspector has approved the rebuild, you may then need to bring your documentation to the tax collector’s office to apply for your rebuilt title.
Should You Insure a Car With a Salvage Title?
While you can insure a road-worthy salvage car with a rebuilt title, it does not necessarily mean that it is a good idea. Factor in the pros and cons of purchasing a salvage car for driving before committing.
Pros of Insuring a Salvaged Car
- You may be able to purchase a rebuilt salvage vehicle at a significant discount. Generally, vehicles with rebuilt titles are considered to be worth 20% to 40% less than the Kelley Blue Book value of the same vehicle with an unblemished title.
- You may be able to repair your salvaged vehicle rather than purchase a replacement vehicle. For example, if your insurance company totaled your vehicle due to the cost of repairs but you are able to negotiate a better price with a mechanic, it may be economical to make the repairs and request a rebuilt title.
- Inspection requirements can provide some reassurance that the vehicle is safe to drive. If a vehicle does not meet minimum standards, it cannot receive a rebuilt title. You can be reasonably confident that the rebuilt vehicle meets minimum safety standards.
Cons of Insuring a Salvaged Car
- Some insurance companies refuse to write policies on vehicles that have previously been salvaged. This could require you to switch from your preferred insurance company.
- It may cost more to insure a vehicle with a rebuilt title than a vehicle with a clean title. Some insurers impose a surcharge of up to 20% to account for the previous condition of the car.
- A rebuilt vehicle may have safety issues that were not repaired, creating potential hazards. While a rebuilt vehicle typically must pass an initial test, undetected problems could increase your chances of having an accident.
- Many insurance companies only offer liability coverage for rebuilt title vehicles. This can leave you unprotected against the costs of repairing damage if you are in an accident or if your car is damaged by a falling tree or other hazards.
How to Insure a Salvage Car
To insure a salvage vehicle, you must sufficiently repair it and complete the steps to receive a rebuilt title. After that, the first step to insuring your newly rebuilt title vehicle is to narrow your insurer options down to those willing to issue insurance on rebuilt title cars. From there, compare quotes and coverages to determine which insurance company and policy best suits your needs.
To apply for rebuilt car insurance coverage, the insurer may require the following documentation:
- A copy of your title, registration, and vehicle identification number (VIN)
- Certified mechanic’s statement verifying that the vehicle is in good working condition
- The vehicle’s original repair estimate, including a list of damages to help prove that the vehicle has been completely repaired
- Photos or video footage of your vehicle’s current condition
Some insurers may also require an independent inspection before issuing insurance on rebuilt title cars.
Depending on your insurance carrier, you may only be able to purchase auto liability coverage and other insurance that is required by your state, such as medical payments or personal injury protection (PIP) and uninsured motorist coverage. Liability coverage helps protect you if you injure someone or cause property damage as a result of a vehicular collision, but it does not provide coverage for damage to your vehicle.
It may be difficult to find a company that issues comprehensive and collision coverage on rebuilt title vehicles due to the potential difficulty of identifying new damage against damage that already exists. Going without this coverage could leave you with a large repair bill if your vehicle suffers damage from an accident, vandalism, theft, or inclement weather. Premiums are also typically higher for rebuilt car coverage.
Insuring a Salvage Car vs. a Clean Title
While it is possible to insure both a rebuilt salvage vehicle and a vehicle with a clean title, the former typically requires significantly more effort. When insuring a vehicle with a clean title, you can typically choose from a wide range of insurance providers and have the option to shop around, comparing both policy coverage and pricing.
Once you choose an insurance provider, the application process for a vehicle with a clean title is very simple. After submitting some basic information, you can typically obtain coverage right away without having to provide additional documentation.
Generally, insuring a vehicle with a clean title can save you time, money, and hassle. However, it is possible to insure a salvaged vehicle that has been sufficiently rebuilt as long as you follow the correct process and understand there may be insurance coverage limitations.
What To Look For If You Buy a Car With a Rebuilt Title
If you understand the potential obstacles and are still committed to purchasing a vehicle with a rebuilt title, it is important to do some research and fully understand what you are buying. First, check the vehicle’s history reports to determine exactly what damage occurred that caused it to be totaled in the first place. You can find this information through a free service such as VINCheck, or purchase a report through the National Motor Vehicle Title Information System or a similar service.
Be wary of vehicles with frame or flood damage. Frame damage is expensive and difficult to fix and, if not done correctly, can lead to other serious problems. Flood damage can also cause extensive issues. If you come across a salvage vehicle with water damage, consider moving on to another option.
Next, find out where the vehicle was repaired and look into the mechanic’s reputation. If possible, also compare the seller’s receipts and repair records so you can understand the extent of the repairs that were completed. If everything checks out, the last step is to have the vehicle thoroughly inspected by a trusted mechanic before making a purchase offer.