Salvage Title Vehicles & Insurance
A salvage title is something that is issued by a state when a vehicle is severely damaged and the costs of repair can exceed the vehicle's value. Usually, this happens when an insurance company has deemed a vehicle covered by a policy a "total loss." When these vehicles are salvaged, or repaired, the state issues a salvage title. Even cars that have been in floods or stolen can fall under the salvage title distinction.
A salvage title shows that a vehicle was totaled in the past. Typically, a "totaled" vehicle is one that sustained damages in excess of 75 percent of the car's pre-accident value.
A car insurance company usually makes this determination afterhaving declared the vehicle a total loss and then sells the totaled vehicle at an auction to recoup some of its losses. If an individual or a dealership purchases the vehicle, significant restorations will be necessary to make the car roadworthy again. Once the vehicle is ready for resale, it must carry the designation of salvage-titled vehicle to alert buyers about its history. Every state has a different way of categorizing "title brands." Aside from salvage title, you may see names like reconstructed, restored, rebuilt, junk, reconditioned, repaired, unsafe, and non-repairable.
Insuring Salvage-Titled Vehicles
In addition to the obvious safety concerns, owners of salvage-titled cars also have to worry about insurance issues. Because the average salvage title vehicle is worth about 40 percent less than the same vehicle with a clean title, insurers offer significantly reduced benefits for these vehicles. If your insurer will issue a full coverage policy for a salvage-titled vehicle, the payout you will receive if you file a claim will be minimal. This applies to physical damage coverage claims, or claims against your collision coverage or comprehensive coverage. Some insurers may up your rates if you insure a salvage-titled vehicle because of the safety risks associated with of these vehicles.
Before an insurer will offer coverage on a salvage-titled vehicle, it will likely have to pass an inspection first. State law usually requires salvage-titled vehicles to be inspected by the state police or the motor vehicle department (MVD). Your insurer will want a copy of the inspection certificate in this case. In states where an inspection is not mandated by law, your insurer might ask you to obtain a "garage report" on the vehicle, which is a certificate from an authorized repair or restoration shop indicating that vehicle is safe and roadworthy.
Physical Damage Coverage
Some owners may not be able to get any physical damage coverage for a salvage-titled vehicle. Whether physical damage coverage is available will depend on the insurance company and state laws. Most car insurance companies will provide liability-only coverage, medical payments, and un-insured motorist and under-insured motorist coverage for vehicles with salvage titles, but collision coverage and comprehensive coverage are much more difficult to get. This is usually because certain states will not allow insurers to provide full coverage on salvage-titled cars. If your state and your insurer allow physical damage coverage for your salvage-titled vehicle, you should consider if the premiums for the coverage are worth it. A salvage title reduces the actual cash value of the vehicle substantially, so you wouldn't get much benefit from purchasing collision and comprehensive.
What Should I do to Protect Myself?
No matter the scenario, someone buying a used car should use a vehicle-check service. These computerized services track a VIN (vehicle identification number) for the entire history of a car. You'll find out when it was bought and sold, when it was serviced, and if it was in an accident or had a salvage title. Most importantly, you'll be able to make an informed purchase, and drive away with peace of mind. Regulations on salvage titles vary from state to state, so check with your local department of motor vehicles to learn how salvage titles can affect you.