Purchasing a vehicle with a salvage title can be an affordable way to buy a car, but insuring it comes with some challenges you might not be aware of. Salvage title vehicles have complex regulations and often require specialty insurance plans that offer limited coverage. Here’s what you need to know about car insurance for salvage title cars.
What is a Salvage Title?
A salvage title is issued for a vehicle that has been damaged to the point that repair costs exceed the vehicle’s pre-damage value. This usually occurs when an insurance company declares the vehicle a total loss after an accident or weather event like hail damage or flooding. The insurance company pays out the claim, takes possession of the vehicle, and applies for a salvage title. The vehicle is then sold at auction to auto recyclers or individual buyers looking for project cars.
Vehicles are issued salvage titles to alert future owners that the car has sustained major damage. The salvage title remains with the vehicle even after repairs are made. Not all salvage title vehicles are dangerous to drive, but their complex claim history makes them more difficult to insure.
Why Is It Hard to Get Car Insurance for Salvage Titles?
Insurance companies are reluctant to offer full coverage on salvage title vehicles for a few reasons:
- Higher Risk – Vehicles with salvage titles are statistically more likely to be in another accident. Parts may not be repaired properly, or hidden damage may occur. This makes the vehicles riskier to insure.
- Difficult to Assess Damage – The insurance agents may not be able to correctly gauge the damage, repair damage, and remaining risks. This makes the vehicle’s current condition difficult to accurately evaluate.
- Lower Value – Salvage title vehicles have a lower value than similar clean-title cars. This reduces premiums, which are based partially on a vehicle’s value. Lower premium revenue makes the cars less profitable for insurers.
- Increased Fraud Potential – Salvage vehicles present increased potential for fraud. Individuals may try to hide the vehicle’s claim history to illegally receive higher insurance payouts.
- State Regulations – State DMV regulations limit what coverages insurers can offer on salvage title vehicles. This prevents insurers from managing risk through restricted coverage options.
So in summary, the combination of high risk, unknown factors, lower value, fraud potential, and strict regulations make salvage title vehicles a challenge for insurers. That means finding affordable insurance requires effort on the buyer’s part.
Insurance Quotes for a Salvage Title Vehicle
Here are sample insurance quotes for insuring a 2009 Toyota Camry for one year, with a salvage title in Dallas, Texas.
- AAA – $3,640
- National General – $3,651
- Safeco – $4,034
- GEICO – $4,158
- Progressive $4,621
- Nationwide – $4,723
- Mercury – $4,903
- State Farm – $4,986
- The Hartford – $4,988
- Allstate – $5,009
- American Family – $5,042
- Travelers – $5,086
- Farmers – $5,201
- Liberty Mutual $5,287
- *USAA – $3,424
As you can see, annual premiums range from around $3,424 up to $5,287 for basic liability coverage. USAA offers the lowest rate, likely because they cater to military members who may be more familiar with salvage title vehicles. Mainstream companies like Allstate and Liberty Mutual have much higher rates.
Comprehensive and collision coverage is usually not available for salvage title cars. If you can find those add-ons, expect very high premiums and high deductibles around $1,000 or more.
Tips to Save on Salvage Title Car Insurance
Here are some valuable tips to get the lowest insurance rate for your salvage vehicle.
- Compare quotes from both standard and non-standard insurers. You may find a specialty insurer like National General offers better rates.
- Ask about any discounts for defensive driving courses, low mileage, multi-car policies, anti-theft devices, and good student driver discounts if applicable.
- Increase your deductibles as high as you can afford to lower rates.
- Bundle your salvage auto policy with renters or homeowners insurance for multi-policy discounts.
- Exclude optional coverages like roadside assistance or rental reimbursement to reduce costs.
- Ask your insurance agent about any “limited coverage” options exclusive to salvage title cars. There may be ways to reduce certain coverages that are not advertised.
- Shop rates every 6 months and be ready to switch companies if you find a better deal. Loyalty rarely pays off.
- Maintain a good credit score for the best pricing.
- Consider dropping collision and comprehensive coverage if you have a cheap vehicle valued under $3,000. The premium savings may outweigh the risk.
- Drive safely and maintain your salvage vehicle well. Avoid further accidents or damage, as your already-high rate will likely increase.
Laws and Regulations on Salvage Title Vehicles
If you choose to insure a salvage title vehicle, be aware of the special laws and regulations:
- State DMVs restrict the types of coverages insurers can offer on salvage cars. Liability-only policies are common.
- Liability limits are often lower than regular policies. Minimums may be as low as $25,000 bodily injury per person.
- Collision and comprehensive coverage is usually excluded, unavailable, or very limited on salvage cars.
- Insurers can cancel a policy after 60 days with only 15 days’ notice if a salvage title is discovered mid-policy.
- Premium rates for salvage title vehicles are not regulated in most states. Insurers can set arbitrarily high rates.
- You may need to provide evidence of repairs and pass a state inspection before registration is allowed.
- DMVs will brand the title permanently as “salvage” or “rebuilt”. This must be disclosed when re-selling.
- Additional fees and taxes apply when initially registering a salvage title vehicle.
- It is illegal to drive uninsured salvage title vehicles on public roads. Penalties include fines and impoundment.
The complex regulations make it essential to find an insurer familiar with salvage title vehicle laws in your state. An experienced agent can explain your coverage and registration requirements.
Insuring a salvage title vehicle takes some effort. Finding an insurer to cover your salvage vehicle can be done, but rates are often significantly higher than non-salvage cars. The key is comparing multiple quotes, utilizing available discounts, and following your state’s salvage title regulations carefully.
With some diligent insurance shopping, owning a salvage car can be affordable. Just make sure you understand your insurance plan’s coverages, exclusions, and legal requirements. Get salvage car insurance quotes now. To get started, enter your zip code and fill out a free online application. Get five or more instant salvage auto insurance quotes and find your best rate.