How to Insure a Car With A Salvage Title

Posted September 21st, 2017 by Jason Metz

If you own a salvage vehicle or you’re considering buying one, it’s important to understand the challenges you may face when registering and insuring the vehicle. A salvage vehicle is when an auto insurance company deems a vehicle a total loss, when the cost of repairs (after a loss, such as an accident or flood) is greater than the actual cash value of the car.

After a vehicle is deemed a total loss, the auto insurance carrier or owner is required to notify the state’s DMV that it has been totaled. Depending on the individual state, the car will be issued what’s referred to as a “salvage title” or a “salvage certificate.” This designation means the vehicle cannot be sold, driven, or registered in its current condition.

From there, if the vehicle is repaired, your state’s DMV will have to inspect the vehicle to determine if it’s roadworthy. During the repair process, documentation is key. Have records, receipts, and photos. Your state’s DMV will likely require you to have the bill of sale and salvage title. Keep in mind, at this point, your vehicle is not legal to drive, so you’ll have to have it towed to the inspection facility. Once the vehicle has passed inspection, you’ll receive a re-branded title indicating that the vehicle has been rebuilt. Another thing to keep in mind: each state has different processes, fees, and nuances, particularly if you bought the salvage vehicle out of state. You’ll want to research your DMV’s procedures before purchasing a salvage vehicle to make sure it’s worth your cost and effort.

If you have a vehicle that’s repaired and has been inspected by the state and deemed roadworthy, you want car insurance for it. 

Some insurance companies won’t insure a salvage vehicle or they may not offer optional coverages such as comprehensive and collision insurance. Some insurance companies figure they’re not able to determine an actual value on a salvage vehicle as opposed to a vehicle with a clean title, and they’re hesitant to offer collision coverage, but may offer liability coverage. Other insurance companies might offer full coverage car insurance, so it’s best you shop around and speak with several agents and carriers who might be able to determine what coverages are available for your specific vehicle.

If you’re looking to purchase a salvage vehicle and have it insured, while there are some additional hoops to jump through to get a re-branded title and insurance, some car buyers find it’s a great value. Salvage vehicles are likely to have a sticker price that’s well below the cost of a similar vehicle with a clean title. For some, this is too good of a deal to pass up.

While some buyers may find it financially feasible, others might find it to be more of a headache than it’s worth. Before buying a salvage vehicle, understand why it was deemed a total loss. Was it an accident? A flood? Vandalism? Do you foresee this vehicle as having a problem passing your state’s annual inspection? If you’re not confident in repairing and maintaining a vehicle, it’s good to consult with a trusted mechanic who may be able to point out any potential issues or downsides to the specific vehicle you’re interested in.

With any financial decision, we recommend research and understanding the make and model of the vehicle, your state’s laws, and what insurance carriers are willing to offer in terms of coverage before making a final decision on buying, repairing, and insuring a car with a salvage title.