Salvage Titles and Auto Insurance

Posted June 19th, 2015 by Ashley Kane

Deciding whether or not to save your totaled car can be a big decision. On one hand, you love your car and you might not have time to go through the tumultuous journey that is car shopping, but on the other hand, you don’t want your car insurance rates to rise. Here’s what you need to know about salvage titles and insurance.

What is a Salvage Title?

A salvage title is essentially like a brand title. Basically, when a vehicle is involved in an accident and is totaled, then an auto insurance provider pays a claim on the vehicle equal to its pre-accident value.

In general, car insurance carriers determine a car as totaled if the repairs cost more than the pre-incident value. However, some carriers or states have different requirements. For example, some states may consider a car totaled if the damages are equal to 70-80% of the pre-collision value. 

The totaled car is then usually sold for wreckage at an auction. Anyone that buys the damaged car is given the salvage title alongside it. This means that even if the car is completely repaired and inspected or given the okay to drive, it will always permanently have the salvage title on its record.

Salvage Titles and Insurance:

Sometimes, after a driver discovers that their car is totaled, they still choose to keep it. A car insurance company might cash out the claim for its worth, and then the repairs are left up to the driver. Some might choose to do this because of their love for the car or because they disagree with the carrier’s valuation. Others may have just come across a car with a salvage title and decided that it was a good, cheap deal.

However, before choosing to keep your own salvaged car or purchasing one off the street, you should be aware of the influence of a salvage title.

There’s a strong negative connotation with salvage cars. Even if repairs are done correctly, and the car is inspected and deemed safe, the car was still badly damaged at one point in time. Because of this, auto insurance companies see these cars as “higher-risk.” They are more likely to have recurring problems, such as electrical issues or damaged frames. They might not run as well as originally thought.

As a result, car insurance carriers may raise your premium on a salvage car due to perceived safety issues. In fact, car insurance carriers may require higher liability insurance, offer only partial insurance, or even choose not to cover your salvaged car at all.

What Should You Do?

Before saving a salvaged car or making necessary repairs, consider the return. Compare the losses and benefits and speak with your insurance company or other providers to see what coverage options are available with a salvage title. Then, you can determine if the title is worth the struggle or if the ordeal will cost or save you money in the long run.

Here at EverQuote, we know cars have sentimental value. But before you dig yourself into a cash-burning hole, consider all of your options.

Photo Credit (top image): Daniel Lobo, Greg Olotka, Bob n Renee