Nearly every state in the United States requires that motorists carry minimum levels of auto insurance coverage. Therefore, making sure that a salvaged vehicle is insurable represents one of the fundamental considerations before buying a salvaged car from a vehicle auction.
The rules that govern coverage of salvage vehicles (or rebuilt title) insurance can be complicated and largely depend on the insurance carrier’s policies and how state law treats the question of salvage and rebuilt titles.
Before exploring the issue of whether a salvage vehicle can be insured, it is important to understand the definition of “salvage”.
Understanding the Salvage Title Designation
Contrary to popular belief, a vehicle with a salvage title has not always been in a collision. Rather, there are some other events in a vehicle’s history that can lead to a salvage title designation under either relevant state law or insurance carrier policy. Therefore, a buyer must be aware of the various events in a vehicle’s history that can result in a salvage title designation.
Flood Damage: Flood-damaged vehicles are not always designated as salvaged. Some states will use a special designation for flood damage while others simply include flood damage under the general category of “salvage title.”
Hail Damage: Hail damage can range from a few dings to severe damage to a vehicle’s exterior. Some states have a specific “hail damage” designation or treat severe hail damage as a precondition for a salvage title.
Theft Recovery: When a vehicle has been stolen the insurance company will reimburse the owner for its replacement value after a certain period. If the vehicle is eventually recovered, the insurance company will likely sell it. Some states will issue a salvage title for the car. According to Edmunds, the following states issue a salvage title after a car has been stolen: Arizona, Florida, Georgia, Illinois, Maryland, Minnesota, New Jersey, New Mexico, New York, Oklahoma and Oregon.
Repairable After Damage: The most common example involves a severely damaged and that can be repaired and made operable again. In these cases, the state will allow the vehicle to be repaired, on the condition that the title be labeled as “salvaged.”
To be insured and legally driven on the road, a car must be declared roadworthy. Salvage vehicles that have been repaired and declared roadworthy will get a rebuilt title.
Insurance Carrier Rules and Rebuilt Titles
The types of coverage available vary by carrier. Generally speaking, insurance carriers will provide some coverage for a vehicle with a rebuilt title.
Given the risk of insuring a vehicle that has been rebuilt, insurance companies frequently offer coverage that differs significantly from standard coverage when considering the level of coverage and costs. Vehicle owners can expect to pay a bit more in premiums and receive less coverage. However, it is important to note that each policy is issued at the discretion of the carrier and is decided on a case-by-case basis.
Ultimately, the unique circumstances in a vehicle’s history will dictate the type of coverage available. For example, State Farm insurance will not offer insurance coverage to existing customers on any vehicle that has previously been identified as a total loss by State Farm.
However, the company is willing to provide coverage for a vehicle that has been declared a total loss by another insurance provider. Even if the vehicle is reported insurable, it will require an inspection to determine the type and amount of coverage that will be provided.
Progressive will offer coverage for rebuilt cars. However, the company will provide comprehensive coverage, but it does not offer coverage for vandalism, theft, fire or collision. If a loss occurs, the company will only pay up to forty percent of the actual value of the car’s Kelley Blue Book value.
Given the information provided here, it is clear that your purchasing strategy should be aligned with the ability to obtain insurance. If a vehicle’s history presents issues as to future insurability, it may be prudent to pass on the opportunity.
Therefore, buyers should always consider that if a car is uninsurable it will likely have little market value since it will not be able to be driven legally. One way to counter this problem is to first consult with insurance carriers, discuss their policies, and guide one’s car auction strategy accordingly.