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 18, 2021

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Here's what you need to know...

  • A salvage title is a title that’s issued for vehicles that have been damaged and declared a total loss by an insurance company
  • When a car is damaged and the repair costs exceed the vehicle’s value, the car will officially be declared a total loss
  • In some states, vehicles that have a bent frame or that have been damaged in a flood must be issued a salvage title regardless of how much the damage costs to repair
  • When you’re applying for coverage, the insurer may ask about title status. It’s important that you’re honest about having a salvaged vehicle in the event that you have a loss
  • It’s generally not a problem to get liability coverage on a salvaged vehicle, but getting comprehensive and collision may be prohibited due to the vehicle diminished value

When a vehicle is involved in a crash, one of the first thing the insurance company does is determine how much it will cost to get the vehicle back to its pre-loss condition. The total estimated repair costs are what will ultimately dictate whether or not the vehicle will be declared a total loss. If the insurer inspects the damage and estimates that the repairs will cost more than what the vehicle is valued at, the vehicle will then be declared a total loss. If it makes financial sense to repair the car, the carrier will cut a check to settle the claim. Compare car insurance rates now by using our FREE tool above!

A vehicle that has been previously declared will be issued a salvage title. The only time a vehicle is eligible for a salvage title is after it’s been repaired and after it’s met the salvage vehicle regulations set by the state. Once a vehicle has passed an inspection with the Highway Patrol, it may be eligible for a registration. If you’re debating whether you should keep your total loss, it’s important that you learn some of the drawbacks of having a salvaged car. One of these drawbacks may be securing insurance coverage.

When does an insurance company declare a vehicle a total loss?

It doesn’t always take a major collision to total a vehicle. Since even a minor fender bender could lead to a total loss settlement, it can be a huge temptation to keep your vehicle that now has been classified as a wreck.

To understand why a vehicle might be declared a total loss after a minor crash you need to first understand your insurance contract. Under your contract, it specifically says that your Personal Auto Policy will only pay up to the Actual Cash Value of the vehicle when it’s in need of repair. If the cost of repairs exceeds the ACV of the car, the insurer is only obligated to pay the cars value instead of arranging all of the repairs. This is why the claim is labeled a total loss settlement.

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What is the Actual Cash Value?

Both comprehensive and collision coverage will only pay up to the car’s ACV, but it’s difficult to measure how much that is if you don’t know what ACV means. The Actual Cash Value is technically defined as how much the vehicle is worth on the market at the time of the loss. ACV does use depreciation whereas Replacement Cost Valuation does not. The insurer will consider the car’s condition, special features, mileage, trim level, and the location when declaring a value.

How minimal damage can lead to a salvage title

Your car probably is worth more in your eyes than it is in the eyes of the insurer. If the vehicle doesn’t retain value, it has extremely high mileage, it’s an older model, or it has pre-existing damage, the insurance company might feel like it’s worth very little money. If the insurer has searched the market and decided the car is worth $750 and the car costs $800 to repair, the car is a total loss by definition.

Turning in the Vehicle’s Title

After any total loss settlement, the insurer is required to turn in the vehicle’s title. A new title isn’t issued until the vehicle has been inspected and approved for operation. If the damage was strictly cosmetic, there’s a good chance you’ll be approved for a salvage title without even making any of the repairs. If, however, there’s a need for mechanical repair to make the vehicle fit for the road, the repairs must be made before a salvaged car is issued.

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Will an insurance company provide coverage for a salvage vehicle?

When you are keeping a salvage vehicle after a loss or you’re purchasing one from a private seller, it raises a lot of questions for the insurer.

One of the major issues that will arise when you take ownership of a salvage car is covering it with the appropriate insurance.

Since it’s against the law to operate any registered vehicle on public roads without insurance, it’s important that you look for insurance coverage for your salvage vehicle before you take any leaps. Here are some of the questions the insurer might ask before the car will be determined eligible for cover:

  • Does the vehicle have rust from a flood loss?
  • Does the vehicle have serious frame or structural damage that compromises your safety?
  • Is the vehicle in roadworthy operational condition?
  • Has the vehicle been fully restored?
  • What type of coverage does the applicant want to buy?

Can you purchase physical damage on a salvage vehicle?

In most cases, standard insurance companies will provide Bodily Injury and Property Damage Liability coverage for a salvage car. Where the concern lies is when the owner wants to purchase physical damage coverage for the car. While it’s not common, some companies will provide comprehensive and collision on a salvage vehicle that’s been fully restored. Here are the requirements that must be met before you can buy comprehensive and collision:

  • The vehicle must pass a detailed mechanical inspection
  • The owner must provide several photos of the vehicle at all angles to highlight if there’s pre-existing damage
  • The insurance agent must inspect the vehicle at the agency to verify the car has been restored
  • The vehicle must retain some market value for physical damage coverage

Does buying salvage make sense?

Buying salvage might make sense if you’re willing to do your homework. You need to consider the vehicle’s condition, where it was repaired, what type of damage it sustained, and how much you’re willing to spend.

If you have the cash to spend and you aren’t relying on financing, you might get more for your money with a restored salvage car.

A salvage car might affect your insurance only when you want physical damage cover. Be sure to speak with your agent before you commit to buying a car that’s been totaled. If you’re not happy with what you discover, use an online rate comparison tool and find out how much the car will cost to insurance elsewhere. Enter your zip code in our FREE tool below to start comparing car insurance rates now!