A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 19, 2021

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There are several previous damage title facts and myths that consumers should be aware of, especially when it comes to purchasing and insuring a vehicle. However, even if you do not want to insure the car, you still need an honest and trustworthy history.

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Primarily you must have clarity of the term damage. When you start inquiring about damage titles, be sure you understand the difference between a totaled, junked, or reconstructed vehicle.

All three have very special requirements under state laws and only a car insurance company or the Department of Motor Vehicles has the authority to define them as such.

The most common cause for a change in the status of a vehicle’s title is a major collision where severe damage results.

Some states like Oregon have finite rules and regulations that the car owner must adhere to in order to acquire the proper title documentation.

After an accident, even before you notify your car insurance provider, you have responsibilities to give details to the proper law enforcement officials. You should render assistance to the injured, exchange personal information and report the occurrence to the Department of Motor Vehicles.

Another state-specific law in Oregon surrounds unattended vehicles and collisions. If you hit an empty car, you must attempt to locate the owner of the vehicle. If not, you must leave your personal information nearby so they know you caused the accident and to allow them time to contact you.

Many states have laws regarding vehicle collisions and it is a good idea that you familiarize yourself with the details. In addition, when the time to file a claim arrives, your insurer may not need to make extra inquiries before ruling on the cause and assessing fault.

Totaled Car Conditions Are Not Always What You Think

When a car insurance company receives a damage claim, it is their responsibility to review the information and make a decision. Based on their assessment, they determine how to pay you.

If the amount of repairs costs more than the value of the vehicle, they consider the loss too great and write the accident off as totaled. However, most people believe they retain ownership of the car.

In fact, this process clears the car insurance company’s financial obligation to the customer to pay the full amount of the damage. This means the customer receives compensation according to the current value of the vehicle.

Within 30 days of the insurance company’s decision, the owner must surrender their rights to the car. They can send the title to the insurance company or the Department of Motor Vehicles.

If the Department of Motor Vehicles receives the title, they forward a copy to the insurer who reports this information on a national level. They void the old title and update the new title based on the status of the damaged vehicle.

Just because an automobile insurance company lists a car as totaled, it does not mean it cannot receive adequate repairs and be resold later.

The car insurance company can invest in minimal repairs and sell your former vehicle at an auction or to a private car dealership. They transfer ownership in the form of the title to the buyer who must disclose the information to anyone interested in making the purchase.

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Reconstructed Vehicle Requirements

This is a very tricky status for titles, because most consumers assume it refers to the repairs on the vehicle and to some degree, this is true. However, a reconstructed title really means the owner did not receive coverage for the damages from their insurance company. They may not have had insurance or their claim received a denial.

This makes them responsible for turning in their title of ownership to the Department of Motor Vehicles within a 30-day period after. Once the DMV receives the title, the owner has the option of applying for a reconstructed title if they make the necessary repairs. Unfortunately, the costs are usually enormous and most will forfeit this step.

The main reason people utilize car insurance is to cushion the financial blow. If your automobile insurance company fails to settle your claim in your favor, you are on your own.

To qualify as a reconstructed vehicle, the car must closely resemble the same year and model and cannot be a replica. The same manufacturer cannot complete the repairs, nor can a factory using manufacturer parts.

You must locate an independent repair shop that uses authorized parts, such as a component kit with the Manufacturer’s Certificate of Origin (MCO) attached to the kit. The reconstructed vehicle must also have the original vehicle identification number intact.

Junked Vehicle Stipulations

Most states define a junked vehicle as an abandoned car that does not have license plates or a valid inspection sticker. The automobile is often dismantled, wrecked, and discarded. It can be inoperable for a minimum of three days.

A registered car-owner cannot legally discard their vehicle without notifying the Department of Motor Vehicles. Often times, it is a law enforcement officer who discovers these types of vehicles. They attempt to locate the previous owner through a registration and title search.

A common misconception surrounding these kinds of cars is the retrieval process. Many times, people believe since they still have the title, they own the vehicle. Under normal circumstances, this might be true. However, since they broke the law, they surrender their rights and the state claims the property.

If the vehicle has a valid car insurance policy, the provider also receives notification of the status. The title changes to junked and cannot go through the reconstruction process. Only salvage yards or auto repair shops receive permission to purchase.

Title Damage is Only Necessary When a Vehicle is Purchased

This is a very common myth that most consumers believe to be fact and since the first commercial for CARFAX began several years ago, it is difficult to dispel. Many consumers may not understand the difference between the CARFAX car history and the official document on file with the Department of Motor Vehicles.

One reason is that the CARFAX car history also contains information regarding title problems. It also holds data concerning accidents and service and ownership history, including verified mileage and the number of previous owners. Nevertheless, CARFAX does not have an entire background. Their records have limits and are at times, spotty.

In truth, it is necessary for all damaged vehicles that car insurance companies label totaled, junked, salvaged, or reconstructed to receive a damage title. This is why the complete records are only available at state-based or national facilities sponsored by the United States government.

The North Carolina Department of Justice is a great resource to utilize if you need an at-a-glance review. They list the specifics regarding new and used car disclosures free, unlike other sources that charge a fee.

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Fraudulent Claims and Car Theft

Most believe because someone plans to purchase a car that this type of disclosure is required, however, no one thinks about other, more costly events. In reality, an unfortunate example is the increasing number of fraudulent auto insurance claims.

The United States economy suffered losses of more than $500 million between 2001 and 2007 due to false car insurance claims.

Car theft too, makes damage titles necessary because of altered or fabricated vehicle identification numbers. The Anti-Theft Car Act of 1992 makes mention of these two issues, specifically.

The easiest way to combat both of these chronic problems is for the authorities to trace each vehicle accurately. They depend on the cooperation from the car insurance industry to do their part and comply with state and national regulations.

This ensures that any tampering with original, manufacturer parts, etching, or safety devices is kept on record. It also acts as a deterrent, if someone decides to resell a stolen vehicle.

An Insurance Company Must Report All Damaged Vehicles

According to the National Motor Vehicle Title Information System, this is true. Any auto insurance company must send monthly reports regarding the salvaged or junked cars they receive. The extent of damage is not limited to collisions.

When a car insurance company receives a damage claim for typical accidents, they must keep accurate records. However, they must also report on other destructive activities, like flood, fire, vandalism, and theft.

They must submit this information to the NMVTIS each month for all cars they insure including the current year as well as four years prior. This helps the NMVTIS to remain current and informed. In addition, they must present their findings for each claim and recommendations for a title status change.

The car insurance companies do not have to comply with the NMVTIS on all their suggestions, such as providing company name, entity, or private owner that retains or takes possession of the car. Nonetheless, it is highly advisable that they do. At times, they may also request any other pertinent information that relates to the title process.

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