Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • A salvage-title vehicle is a vehicle that has been totaled by an insurance company and then repaired. In some states, vehicles that have been stolen and then recovered must also be sold with a salvage title
  • When a car is totaled, it means that the damage the car sustained in a loss exceeded the vehicle’s Actual Cash Value. In some states, water damage and damage to the car’s frame will automatically total the vehicle
  • You have the option to keep your vehicle when it’s totaled. You won’t be able to get a new title until you show the car is operable and safe to drive. When the new title is issued and you have a valid registration, you need to maintain liability insurance on the car
  • Not all auto insurance companies will offer vehicle owners coverage when they own a salvage-title vehicle. You need to disclose that the car is salvaged before you assume that you’re covered because companies can deny claims
  • Some companies won’t provide physical damage coverage on salvage-title vehicles. If the company is willing, they will inspect the car and take pictures before they add full coverage to the car

When you have an accident or another type of loss resulting in damage, it’s possible that your vehicle could be declared a total loss. When an insurance company assesses the damage to your vehicle and then makes a settlement offer, it’s up to you to decide if you’d like to keep your precious piece of machinery or sell it the insurer.

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For some, it only makes sense to take accept the total loss offer and buy a new car. To others, the vehicle holds more value than the insurer has factored in and it makes financial sense to accept a lower payout and keep the car.

Unfortunately, some claimants don’t know that keeping their totaled vehicles could pose problems for them when they shop for insurance in the future. Here’s what you need to know about insuring a totaled car:

Why do some cars have salvage titles?

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There are a few different types of vehicle titles. Vehicle titles are documents that act as proof of ownership and that detail not only who owns the vehicle, but also where the car was first sold and where the owner lives. When you buy a vehicle, it will either have a clear title, a reconstructed title, a rebuilt title, or a salvage title.

A salvage title branding means that an insurance company has declared the vehicle a total loss after an accident, a fire, a flood, a vandalism, or another covered loss.

A vehicle that’s been salvaged can’t get back onto the road until it has been repaired and deemed mechanically safe. In some states, a reconstructed title is issued after cars damaged by fire, flood, or other related losses have been repaired.

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When is a car declared a total loss?

To understand the gravity of how serious it is for a vehicle to have a salvage title, you might first want to understand why vehicles are totaled by insurance companies in the first place. When a car is totaled, it’s written off by the insurer as being either irreparable or as being too expensive to repair.

In most states, a car is totaled by its insurance company when the company has assessed the damage and estimated that the repair costs would exceed the car’s market value. The lower the value of the vehicle, the less damage it takes for a car to be written off.

For vehicles that have only a small Actual Cash Value, even a dent can total the car.

Exceptions to the Total Loss Rule

In some states, cars are automatically totaled when they catch fire or are damaged in a flood. In other states, cars that are stolen and recovered must be branded salvaged even when there’s no damage. If this rule exists, be sure to get documentation showing that the vehicle was salvaged because of a theft and not because of a collision.

You should always familiarize yourself with the Total Loss Threshold where you live if you’re being offered a settlement.

In some states, the repair costs a damage loss don’t even have to exceed the car’s value. This is when a ratio is used to determine if the company has to pay for repairs or if vehicle replacement makes the most financial sense.

Instead of automatically paying for repairs there is a Total Loss Threshold saying that the damage only has to exceed a percentage of the car’s value.

If the TLT is below 100%, you’ll still receive the entire value of the car when the claim is settled. The ratios can range between 60 percent of the car’s value and 100 percent, depending on the state.

Do you have to replace a salvaged vehicle?

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You have two options when your car is totaled.

The first option is to sell the vehicle to the insurer in exchange for the entire Actual Cash Value. The second option is to keep your vehicle and repair it on your own. When you do this, the salvage value of the vehicle will be deducted from the settlement because you’re keeping it.

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If You Keep Your Car, Your Insurer May Ask to See It

If you decide that you’d like to keep your car and repair it, you can’t overlook how the insurance company will view this choice.

The company will still be on the line to pay for claims that you have in the vehicle so they want to be sure that the car is safe to operate. As long as the vehicle passes the inspection, the carrier will still insure the vehicle.

Expect to get a letter asking you to bring the vehicle to an agent’s office to have it inspected. The carrier will look to see if the damage has been repaired and if the car is safe to drive. Some companies will remove comprehensive and collision from salvaged vehicles because they are no longer eligible for full coverage.

If you decide that you’re going to buy a salvaged vehicle, getting insurance might not be as easy.

Some companies have underwriting guidelines that make all salvage-title cars ineligible for coverage. One way to sift through all of the carriers to find coverage on your salvaged car is to get quotes online. Use an online quote comparison tool and you can quickly find a policy that you’re eligible that’s also priced right.

Enter your zip code below to find auto insurance for your salvage car today!