If you’re searching for a used car, you may see advertisements for a salvage car. These deals may sound great, but they raise questions about how buying such a car will affect the cost of your auto insurance.
This article will discuss whether auto insurance is more expensive for a salvage car. To help you in making your decision, our team of experts has reviewed every major insurance provider to identify the best car insurance companies in the industry. Simply enter your zip code below to get free quotes from top insurance providers in your area.
Does a Salvage Title Affect Car Insurance Rates?
Before you invest in a salvaged car, you may want to take the time to understand exactly what you’re getting yourself into. The following information can help.
What is a Salvage Title Vehicle?
A salvage title indicates that a vehicle has been previously damaged and declared a total loss by an insurance company. This usually happens when a car is damaged to the point that the cost of repairs exceeds the car’s value. The insurance company will therefore find it more cost-effective to issue the owner a payout for the value of the vehicle versus investing in costly repairs.
Since insurance companies want to recoup the loss of that insurance claim, the companies will sell the totaled car to an auto repair company to be rebuilt. The vehicle may then be sold again, but most state laws stipulate that the sellers have to sell the car as a “salvage title” rather than a clean title so that future buyers have all the facts and can make an informed decision when purchasing the vehicle.
If you see the words “salvage title,” you know that the car has experienced serious damage, such as:
- A major collision
- Fire or flood damage
- Riot damage
- Hail or weather damage
- Vandalism
If you’re planning to do some of the repair work yourself, salvaged vehicles may help you save money. Otherwise, buying a salvage car may simply not be worth the headache. You may be better off buying a used or new car instead of dealing with any hassle related to a salvage vehicle.
Why Are Salvage Cars Hard to Value?
Salvage cars typically have no Kelley Blue Book value. When they do, they tend to be valued at 20-40% less than other used cars with similar mileage. Also noteworthy is the fact that most financing companies are reluctant to finance a salvage car.
There are two main reasons for this. First, it’s impossible to know how a car’s prior damage might affect its future performance. Second, car buyers are reluctant to purchase a car with a history of significant damage. This means that salvage cars lack market value.
You can use the vehicle identification number (VIN) to obtain a Carfax vehicle history report, which shows the history of the car, but this information doesn’t typically increase the car’s overall value.
How Do Car Insurance Companies View Salvage Vehicles?
Most insurance companies are reluctant to provide insurance coverage for a salvage vehicle, especially when you’re looking for collision coverage or comprehensive coverage.
It’s difficult to assign an accurate value to a salvage car. Insurance companies may also not trust the rebuild. For instance, untrustworthy mechanics may tamper with the odometer or find ways to conceal the age and condition of the car. This makes auto insurance companies wary of rebuilt vehicles.
Getting Car Insurance for a Salvage Title
If you’re serious about investing in a salvage car, consider the following two options:
Skip the Insurance While Restoring the Car
Some states may permit you to keep your car uninsured while it’s being restored, but you may need to deliver a written promise that the car will not be driven during this time. Some states may even ask you to surrender your license plate or require you to pay a reinstatement fee to get it back once the car is restored.
Salvage Car Insurance
Some car insurance companies will sell something known as salvage car insurance. Owners of salvage cars can receive these insurance policies, but they typically only offer liability insurance, not comprehensive or collision insurance. Premiums may also be higher than those of insurance for other cars of the same type due to the higher level of risk associated with a salvage title.
Should You Buy Full Coverage on a Salvage Title?
Keep in mind that full coverage auto insurance might not be necessary if the value of your vehicle is exceptionally low. Otherwise, you’d pay more in insurance premiums than the car is actually worth.
Understanding Salvage Title and Rebuilt Title
It’s important to be able to distinguish between a salvage title and a rebuilt title. A salvage title is issued to a damaged vehicle after it has been declared a total loss. A rebuilt title may be issued to the car once it has been deemed as being completely rebuilt and roadworthy.
Which Car Insurance Companies Insure Salvage Cars?
As a general rule, it’s a challenge to find insurers that will cover salvage titles. However, some big names in the car insurance industry offer coverage for salvage titles. These companies include:
- American Family
- Farmers
- GEICO
- Infinity
- Kemper
- Nationwide
- Progressive
- Root
- State Farm
- USAA
Each company may have different requirements, and some of these requirements may vary by state. For example, American Family requires photos of the vehicle in order to issue a policy, while Infinity and Kemper only provide salvage title insurance in certain states.
Additionally, some companies will provide liability coverage, but getting comprehensive and collision insurance can be nearly impossible unless you can demonstrate that the previous damage was merely cosmetic.
Most insurance companies prefer to provide coverage to a rebuilt title vehicle that has been deemed roadworthy.
Our Recommendations for Auto Insurance
If you’re committed to investing in a salvage vehicle, we recommend you look at a number of top cheap car insurance providers. Simply enter your zip code below to compare auto insurance quotes from providers in your area.
GEICO: 9.5 out of 10.0
We rate GEICO as the best overall company due to its strong reputation for low prices, discounts and other great features. GEICO offers liability coverage to salvage title vehicles provided that the vehicles pass an additional inspection. If your vehicle undergoes an additional inspection, GEICO may provide full coverage.
USAA: 8.9 out of 10.0
We rate USAA as the best military provider, serving members of the military and their families. If this criteria applies to you, then you have access to one of the best car insurance companies in the industry. USAA can provide you with a rebuilt title once the vehicle is deemed roadworthy.
State Farm: 9.0 out of 10.0
We recognize State Farm for offering the best student discount. State Farm will provide insurance for a rebuilt vehicle. If you have other vehicles insured through State Farm, you can also take advantage of the company’s multi-vehicle discount.
Methodology
The Detroit Bureau collects data from every major car insurance provider to formulate rankings of the best insurers. Our in-depth rating system takes into account market share, coverage, pricing, customer satisfaction and ratings from industry experts. Each insurer is given a weighted score in four categories, as well as an overall score out of 10.0.
We recommend auto insurance companies based on these rankings, but we also encourage you to perform your own research and compare quotes to find the best coverage.
