March 30, 2020

Salvage Title Insurance

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Salvage title cars are cheap to buy but expensive to insure. Find out the pros and cons, plus which companies cover rebuilt cars.

Rebuilt salvage title insurance is a type of policy for vehicles that an insurance company declares salvaged after a loss. The vehicles are sold at a car auction, rebuilt and made roadworthy by the buyer, and then resold to consumers.

Buyers of rebuilt salvage title vehicles can find good bargains. But these types of vehicles are harder to insure. Not all auto insurers sell rebuilt title insurance. And those that do may limit the coverages offered.

Before you buy a salvage title vehicle, make sure you understand the challenges you'll face getting it insured.

Differences between Salvage, Junk, and Rebuilt Titles

  • Salvage title: Vehicle can be rebuilt or repaired and made roadworthy.
  • Junk title: Vehicle cannot be rebuilt or repaired because the damage is so severe. In some states, a junk title is called a non-repairable title.
  • Rebuilt title: The title given to a salvage vehicle that has been rebuilt or repaired and inspected to be roadworthy.

State motor vehicle agencies classify these title types under the category of branded titles.

Can You Get Insurance on a Car With a Salvage Title?

Car insurance is available for salvage titled vehicles. But not at insurance companies offer it. And in many cases, you may need to provide proof that the car has been repaired, rebuilt, and inspected.

All insurers will require a Department of Motor Vehicle (DMV) Inspection certificate. You may also need:

  • A certified mechanics statement or garage report stating that the vehicle is roadworthy.

  • Photos of the vehicle if you want comprehensive coverage.

  • Additional documentation from the seller, including copies of the bill of sale, a vehicle appraiser's report, the original repair estimate, the vehicle's history report, and the salvage title.

With a salvage title, your insurance coverages may be limited. Here's what you can expect:

Liability Coverage
Most auto insurers offer only liability insurance for cars with a rebuilt salvage title. The liability limits for property damage and bodily injury are usually limited to the minimums required under your state's law.

Collision and Liability Coverages
Some auto insurance companies sell salvage title insurance policies with collision and liability coverages. Collision coverage is usually limited to 80% of the vehicle's salvage value.

Full Coverage
It's much harder to find an auto insurer that provides comprehensive, collision, and liability coverages for rebuilt salvage cars. Here's why:

  • It's too risky for car insurance companies to assume the vehicle meets the proper safety standards.
  • It's difficult for auto insurers to determine the value of rebuilt salvage vehicles.
  • Auto insurance companies have no way of knowing whether the rebuild will hold up in an accident.

When Buying a Salvage Vehicle
Protect yourself by:
  • Ensuring the seller is reputable by checking online reviews.
  • Bringing a mechanic with you to inspect the car before paying for it.
  • Requesting the original repair estimate so you can actually see the extent of the damage before it was repaired.
  • Jotting down the vehicle identification number to get a free vehicle history report online.

Is It More Expensive to Insure a Salvage Title?

You can expect to pay more for salvage title insurance, usually as much as 20%. It's not uncommon for salvage title insurance to cost more than what the car is worth. Plus, insurance companies only pay out 80% of the salvage value.

Why the added expense? Insurance companies consider salvage cars to be:

  • High risk
  • Have a greater chance of hidden defects
  • Difficult to properly value

Here's a breakdown of the average annual cost of salvage title insurance in comparison to traditional auto insurance costs:

Liability coverage only

  • Standard liability coverage: $470
  • Rebuilt salvage title liability insurance: $565

Policy with collision and liability

  • Standard collision and liability coverages: $1,066
  • Rebuilt salvage title collision and liability insurance: $1,280

Policy with full coverage

  • Standard comprehensive, collision, and liability insurance: $1,620
  • Rebuilt salvage title comprehensive, collision, and liability insurance: $1,945

Other factors play a key role in determining insurance rates, including your driving record, area you live, and the year, make, and model of the car.

Which Insurance Companies Cover Salvage Titles

Car insurance companies that insure rebuilt salvage title vehicles include:

  • Allstate
  • State Farm
  • Progressive
  • The Hartford
  • Safeco
  • General Insurance
  • 21st Century
  • Omni Insurance Group
  • Everest Insurance
  • Infinity Property & Casualty Corporation
  • Esurance
  • National General
  • Titan Insurance

These companies do not offer coverage in all states. And in some states, insurers have to abide by certain state requirements.

For example, in California, drivers buying liability insurance for a salvage vehicle must qualify for the state's good driver discount.

Shop around to compare price quotes for salvage title insurance. Auto insurers treat the risk of salvage vehicles differently, which will be reflected in the policy's price.

How to Insure a Car With a Salvage or Rebuilt Title

Insuring a salvage title car is more time-consuming than insuring a new or pre-owned car. Follow these steps to make the process as smooth as possible.

Get your paperwork ready
Most auto insurance companies require copies of the following documentation:

  • Bill of sale
  • Original repair estimate
  • Rebuilt salvage title
  • Certified mechanic's statement
  • An appraiser's report
  • Safety inspection

Additional documentation may be required depending on the coverage you purchase.

Know your car's value
Generally, auto insurers calculate the value of a salvage vehicle at 75% to 80% less than the vehicle's retail cost. But companies value salvage vehicles differently based on factors like:

  • Extent of damage before it was rebuilt
  • Make, model, and type
  • Car type's present market value

Knowing the value of your salvage car helps when comparing it to the price to insure it.

Call an independent insurance agent
Quotes for salvage title insurance cannot be obtained online. Independent insurance agents eliminate the need of calling each auto insurer separately to find out if the coverage is offered and its price.

They can also help narrow down those auto insurers that offer the type of policy you want.

Compare insurance quotes
Read all policy quotes thoroughly or review them with your agent. It's important to know what each policy does and doesn't cover. Doing a price and coverage comparison reveals which policy is the best value for the price.

Never settle for the cheapest salvage title insurance policy without knowing the coverage it provides. Sometimes the least expensive isn't always the best product.

Buy the policy
Once you decide on the best salvage title insurance policy for your needs, complete an auto insurance application. An auto insurance application asks several questions, including:

  • Your age and gender
  • Your driving history
  • The number of drivers in your household
  • Where the vehicle will be located
  • The primary use of the vehicle
  • Safety features included in the vehicle

It takes about 20 minutes to complete the auto insurance application and get approval for coverage. Your rebuilt salvage title insurance policy is issued on the same day and will arrive in the mail within a week.

Pros and Cons of a Salvage Title Car

A salvage title car is not for everyone. Consider these pros and cons before making your decision.

What Is Good About a Salvage Title Car?

  • Less expensive
  • A great second car for short trips
  • Some salvage vehicles have minimal damage
  • Know the repair history of the car before buying it
  • Already passed a vehicle safety inspection

What Is Bad About a Salvage Title Car?

  • Difficult to get financing
  • Harder to obtain insurance
  • More costly to insure
  • Risk of hidden damage
  • Paperwork and inspections to register
  • Hard resell

Bottom Line

Rebuilt salvage title insurance is a type of policy for vehicles that an insurance company declares salvaged after a loss. The vehicles are sold at a car auction, rebuilt and made roadworthy by the buyer, and then resold to consumers.

Buyers of rebuilt salvage title vehicles can find good bargains. But these types of vehicles come with other challenges, including insuring them. Not all auto insurers sell rebuilt title insurance. And those that do may limit the coverages offered.

It's important to find an auto insurance company that covers rebuilt titles before making the car purchase. The insurer's requirements may influence your buying decision.

In the end, you may find that the money you save buying a rebuilt salvage car is not worth it with the increased cost of salvage title insurance.

Write to Maryellen Cicione at Follow us on Twitter and Facebook for our latest posts.

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