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Whether you are just striking out on your own post-college, or have an established career and a family, saving money is likely on your mind. Everyone loves deals, and there is no denying that and a salvage title car may seem like a great one. After all, what’s not to like? It’s a car that will get you from point A to point B and costs pennies on the dollar compared to what you can get it for on a regular marketplace.
Is a salvage title too good to be true?
In a word – yes. There are quite a few reasons why buying a salvage car is not a good idea, car insurance being a primary consideration against it. A salvage car is a tremendous risk for the insurance company who can not assess the actual damage and predict the likelihood of the loss. This is the reason why insurance carriers will only offer coverages that they are obligated to provide by law – i.e., liability to cover other drivers in the case of an accident.
You will be hard-pressed to find a carrier who will insure the car itself for physical damage.
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A growing risk
When it’s time to shop for a new car, it might be tempting to look into buying a rebuilt salvage vehicle. The biggest (and really only) advantage to purchasing a formerly salvaged car is the low cost. If your goal is to save money, then this is a car for you… Or is it? In most cases, a salvage car brings more headaches than it’s worth.
But first, let’s take a brief look at how a car gets a salvage title.
A car gets a salvage title when the insurance company deems it too damaged to justify the repairs. The owner is then paid off, and the carrier keeps the vehicle and registers it as a “salvaged title.” Once the car has been repaired, you can get a “rebuilt” title, indicating that the car was a salvage at some point.
Salvage vs Rebuilt car: Salvage car has been declared a total loss and can’t be driven. A Rebuilt car has been repaired, passed inspection, and can be driven again.
How does this all relate to insurance?
Well, one of the biggest cons to purchasing a salvage or a rebuilt titled car is the difficulty of insuring it. Since the car has sustained severe damage, the insurance company will be taking on significant risks if it insured it. Most carriers will provide the liability coverage on your car.
Physical damage coverage (or full coverage) is where you will run into problems. Many carriers will outright refuse to offer the physical damage coverage component for your car. It means that if you get into an at-fault accident, the damage to your car won’t be covered.
Liability Coverage: covers the other party in the accident if you are at fault for injuries and damage to their vehicle.
Physical Damage: covers the damage to your car due to an at-fault accident.
And don’t even consider not letting your insurance company know that your car has a salvage title. If they don’t find out during the underwriting process, it will come out during claim time, and they are likely to deny the claim altogether.
Some carriers such as Progressive and Geico offer physical damage coverage to salvage cars on a case by case basis. There are several requirements to complete to get full coverage. The requirements vary from carrier to carrier. The most common ones are:
- A statement from a mechanic certifying the car is in good repair.
- Pictures or a video of the vehicle at its current state. The insurer will use the images to compare the before and after if you make a claim.
- Original repair estimate. It details the original damages and the repairs that were made to rebuild the car from salvage back to working condition. You can get the original estimate either from the mechanic who rebuilt the car or the insurance company who declared it as a total loss. The estimate will act as proof that all original damage has been repaired.
Check state laws
Every state has different mandatory car insurance laws. Currently, all states except for New Hampshire mandate liability coverage for all operable vehicles. The minimum limits of required liability may vary from state to state. Check your state laws before deciding to purchase a salvage title (or before deciding to rebuild the salvage and keep it).
Check with your carrier
Since not every carrier will insure your salvage title for physical damage, i.e., comprehensive and collision, it’s essential to notify them that the car has a salvage title. Some carriers like Progressive and Geico will offer the full coverage if you provide supporting documentation and pass inspection. Some carriers will only offer liability. You can use a quote aggregator to get an idea of the insurance cost for your car.
Compare before you buy
Even if the carrier agrees to cover the car with a salvage title, they will almost always tack on a surcharge driving up the premium. Before committing to rebuilding the car from salvage, compare how much the salvage will cost you in the long run (more expensive insurance, cost to rebuild, cost to replace especially if you don’t have physical damage insurance, etc.) with how much a comparable clean titled car would cost you. In the long run, you may find the initial savings not worth the extra headache and the additional expenses.
About the Author
As a former insurance broker for over 10 years, Olga has deep knowledge of insurance concepts and policies. She is passionate about helping others understand the insurance policies they are purchasing and find policies that suit their unique needs.
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