Can You Insure a Salvage Vehicle?

You cannot insure a salvage vehicle until it is repaired. By definition, a salvage vehicle has so much damage and repair needs that state agencies don’t consider it drivable on public roads. If you buy a salvage vehicle without insurance but have a licensed repair shop fix it so that it can pass the required safety inspection, you can insure it.¹

A salvage title is a designation given to a registered car deemed a total loss in accidents. A salvage title says that a car has such extensive damages that an insurance company considers it a total loss. The insurance company gives the insured car owner a check for the car’s fair market value instead of repairing it. When the payout happens, the insurance company transfers the car title and notates it as a salvage title.²

Insurance companies declare cars total losses to remain profitable. Whenever there is a loss, such as damage to your vehicle in an accident, the insurance company evaluates how much it will cost to repair the vehicle. An insurance company might declare a car a total loss if the repairs cost close to or more than the vehicle’s current value. In other words, insurance companies determine the most profitable way to proceed from each loss, whether that is an accident, vandalism, or theft.

Cars with salvage titles are often used for parts, but some people buy these vehicles to repair. Because insurance companies consider them total losses, they are cheap to buy. However, even after the cars are fixed, the titles will show that they were once totaled, making them difficult to insure and resell.

If you plan to drive a salvage vehicle on the road, you need insurance on it. You should investigate all purchase, repair, and insurance costs before buying salvage vehicles to see if they are worth it. In some cases, you might be better off buying a used car that doesn’t have a salvage title.

A vehicle issued a rebuilt title is different from a vehicle issued a salvage title. A salvage title represents a car that is a total loss before any repairs. A rebuilt title means that a licensed mechanic made repairs to a vehicle so that it could pass a comprehensive inspection. Salvage cars are not road-worthy, while rebuilt titles are.

A car with a salvage title may be worth a fraction of the market value for another vehicle of the same make and model. Expect the value to be 20 to 40 percent less than the Kelley Blue Book value, but work with a private appraiser to get the most accurate market value. The low cost is what makes salvage cars attractive to people with small car budgets; they can get salvage-title cars for a lot less than clear-title counterparts.⁴

It’s up to each car owner to determine whether it is worth it to get comprehensive coverage and collision coverage on rebuilt vehicles. Compare the value of the vehicle to the additional collision and comprehensive premiums. If the additional premiums are more than the vehicle’s value, it might not be worth it.

Car owners must realize that insurance companies consider a car a lower value if it has been severely damaged in an accident. Remember that you can only insure a salvage or rebuilt-title car for up to 80 percent of the fair market value of similar models. In other words, you might not get a high payout in an insurance claim.

Follow these steps to get insurance with a salvage title:

1. Get the car rebuilt to pass inspection.
2. Re-register the car with the rebuilt-title designation.
3. Shop around and compare insurance quotes to find cheap car insurance companies that will serve your needs.

Major insurance companies such as State Farm, Mercury, and Farmers will insure rebuilt salvage-title vehicles.

While getting a salvage-title car can save you money on a purchase, it comes with its own set of problems and costs. You must repair the vehicle to meet your state’s driving standards.

Also, you must find insurance for the vehicle, which may be more expensive with lesser coverage. Minimum auto insurance coverage for personal motor vehicles varies by state. To learn more, read our auto insurance FAQs.