What is meant by salvage in car insurance? Complete Guide (June 2023)

Welcome Friends we will discuss What is meant by salvage in car insurance? Ever wonder what exactly salvage means when it comes to your car insurance? You’ve probably heard the term tossed around, but unless you’ve had to deal with a totaled vehicle, you may not fully understand what it refers to.

Basically, when your car is damaged so badly in an accident that the insurance company declares it a total loss, they take ownership of the vehicle. At this point, your car is considered salvage.

The insurance company will sell the salvaged vehicle to try and recover some of the money they paid out for your claim. The key thing to know is once a car is salvaged, it can be difficult to insure in the future. But don’t worry, we’ll walk you through exactly what salvage means and how it can impact you.

1. What Exactly Is a Salvage Title?

A salvage title means the car was in an accident and repaired, but the cost of repairs exceeded a certain percentage of the vehicle’s value, as determined by your state. Usually around 75-90% of the pre-accident value.

In short, the car was totaled by the insurance company, but then rebuilt and put back on the road.

Why does this matter? A few reasons:

1. The resale value will be lower: Most people prefer vehicles with a clean title history. A salvage title signals previous major damage, so you’ll get less when reselling the vehicle.
2. Reliability and safety could be compromised: There’s a chance not all damage was properly repaired, or lower quality parts were used to save money. This could lead to issues down the road and reduce safety.
3. Insurance rates may increase: Some insurers charge higher premiums for salvage title vehicles due to the increased risk. Shop around at different companies to find the best rate.
4. Financing options are limited: Most banks and lenders won’t provide auto loans for salvage title vehicles due to the risks. You’ll need to pay cash or get a personal loan.

While a salvage title vehicle could save you money upfront, there are good reasons most people prefer vehicles with a clean title. Unless you’re a mechanic or car enthusiast, a salvage title probably isn’t worth the headache for your everyday driver.

But if you go in with realistic expectations about the potential downsides, a salvage title car could still be an affordable option. At the end of the day, you need to weigh all these factors and go with what makes sense for your situation.

2. How Does a Vehicle Get a Salvage Title?

So how exactly does a vehicle end up with a salvage title? There are a few common ways:

Major collision damage: If your car has been in an accident and sustained extensive damage that will cost more to repair than the vehicle is worth, the insurance company will likely declare it a total loss. They’ll pay you the actual cash value of the car and take possession of the vehicle. At this point, the title will be changed to salvage.

Theft and recovery: If your vehicle was stolen, reported as such, and then recovered with major damage, the same process applies. The insurance company will declare it a total loss, pay you the actual cash value, and the title will be changed to salvage.

Natural disaster damage: Severe damage from events like floods, hurricanes, or wildfires can also lead to a salvage title. Again, if the cost to repair exceeds the vehicle’s worth, the insurance company will total it out.

Owner retains and repairs: Sometimes an owner will opt to keep their damaged vehicle and repair it themselves. In this case, the title must still be changed to salvage. The owner can then drive and insure the vehicle, but its value will be much lower and it can be difficult to resell.

As you can see, salvage titles are usually the result of major damage that leads an insurance company to declare a vehicle an economic total loss. But with some work, a salvage vehicle can get back on the road and still have life left in it. The key is making sure any necessary repairs are done properly and certified.

3. Pros and Cons of Buying a Salvaged Car

Buying a salvaged vehicle can be risky, but also rewarding if you go in with realistic expectations. Here are some pros and cons to consider:

Pros: Lower Upfront Cost

The biggest benefit of buying a salvaged car is the lower purchase price. Since the vehicle has a damaged history, the resale value is much lower than a comparable clean title car. This means you can often get a newer model year for less money upfront. If cost is a concern, a salvaged vehicle may be your only option to get into certain types of cars.

Cons: Unknown Damage and Repair Quality

However, there are good reasons salvaged cars are cheaper. There could be extensive damage from an accident that was repaired just well enough to get the car back on the road. The quality of these repairs is unknown and could lead to long-term issues down the line. You also don’t know the true condition of parts you can’t see like the frame or engine.

• Frame damage is expensive to repair and can impact safety, handling, and resale value.
• Electrical issues may not appear for months after purchase.
• The engine or transmission could fail prematurely due to the stress from an impact.

Resale and Insurance Challenges

Salvaged vehicles are difficult to resell and insure. They have a permanent title brand as “salvage” or “rebuilt” which scares away most buyers and lenders. Insurance companies also view them as high risk, so your premiums may be higher or you could be denied coverage altogether.

Do Your Homework

If you go into a salvaged car purchase with realistic expectations about potential issues, you can find a diamond in the rough. Get a vehicle history report, have a trusted mechanic thoroughly inspect the car, check service records, and take it for a rigorous test drive. Negotiate the best price you can to account for unknown risks.

While buying salvage is not for everyone, if you do your homework you can get a safe and reliable car at an affordable price. But go in with your eyes open to the potential downsides.

4. Inspecting a Salvage Vehicle Before You Buy

Buying a salvage vehicle can save you money, but you need to go in with realistic expectations. Before purchasing a salvage car, thoroughly inspect it to determine the extent of the damage and ensure it’s roadworthy.

Check the Vehicle History Report

Run a vehicle history report to see the salvage title’s history and learn about any major accidents. This can give you insight into why the car was totaled and help in determining potential issues.

Inspect the Exterior

Carefully examine the exterior of the vehicle for any signs of major damage like dents, rust, or mismatched body panels which could indicate structural damage underneath. Check that doors, hood, and trunk align properly and look for signs the vehicle has been in a major accident like scratches, dings, or faded paint in one area.

Check the Interior

The interior can also reveal a lot about the vehicle’s condition. Look for water damage or musty smells which could indicate flood damage. Check that all features and components like seats, dashboard, center console, and carpeting are in good shape. Test that power seats, windows, locks, and other features are functioning properly.

Test Drive the Vehicle

Take the car for a rigorous test drive to check for any issues with performance or handling. Listen for strange noises from the engine or transmission and feel for any pulling or vibrating sensations. Check that essential components like brakes, steering, and acceleration are responding properly. The vehicle should drive smoothly and handle corners and bumps as expected for that particular model.

Have a Trusted Mechanic Inspect

For the best evaluation, have a trusted mechanic fully inspect the vehicle. They can spot issues you may miss and determine if any major components need repair or replacement. They can also check computer diagnostic systems to uncover problems. It’s worth the cost of an inspection to avoid buying a salvage vehicle that’s unsafe or needs thousands in repairs.

Following these steps will help ensure you go into a salvage vehicle purchase with realistic expectations. While you may get a good deal, there are risks involved with salvage cars. Do your due diligence to determine if the vehicle is roadworthy and a smart buy before you sign on the dotted line.

5. Repairing a Salvage Vehicle to Roadworthiness

Once you’ve purchased a salvage vehicle, getting it roadworthy again will require some work. The extent of repairs needed can vary greatly depending on the severity of the damage. Here are the basic steps to get a salvage car back on the road:

Inspect the Vehicle Thoroughly

Have a trusted mechanic fully inspect the salvage car to determine what needs to be fixed or replaced to meet safety standards. They can spot any major structural or mechanical issues that may not be obvious to an amateur. Be prepared for potentially costly repairs, especially if there was major collision damage.

Make Necessary Repairs

You’ll need to repair or replace any damaged parts like the engine, transmission, brakes, airbags, and seatbelts. Body work like dent removal, panel replacement, and paint matching will also likely be required. It’s best to use new, quality parts from a reputable source for anything safety-related.

Retitle and Re-Register the Vehicle

Once repairs are complete, you’ll need to have the vehicle re-inspected to ensure it’s roadworthy. Then you can apply for a rebuilt or restored salvage title to legally get the car back on the road. You’ll have to pay any required registration and licensing fees for your state.

Consider a Vehicle History Report

Especially if you plan to resell the salvage vehicle, purchasing a vehicle history report is a good idea. It can provide transparency to potential buyers about the vehicle’s accident and repair history. Be upfront about any major repairs or ongoing issues to build trust and get the best price.

Drive Safely!

Now you can finally get behind the wheel of your salvage rebuild! Be sure to get re-insured and take it slow until you’re confident in any major repairs. Drive safely and enjoy your new ride, knowing you saved money by resurrecting a salvage vehicle.

6. Getting Insurance for a Salvage Vehicle

Getting insurance for a salvage vehicle can be tricky, but it’s not impossible. Here are some tips to help you navigate the process:

Check the Vehicle History Report

Run a vehicle history report to determine the severity of the damage that earned it a “salvage” title. Minor damage like hail dents or flood damage may still be insurable, while major collision damage likely won’t qualify for most standard auto policies.

Shop Around at Different Insurance Companies

Not all insurers will cover salvage vehicles, so you’ll need to compare quotes from different companies. Some smaller, non-standard insurers specialize in high-risk policies and may be open to covering your salvage car. Be upfront about the vehicle’s history and condition. Lying or withholding information to get a lower rate is considered fraud.

Expect Higher Premiums

Due to the increased risk, insurance for salvage cars typically costs significantly more. Premiums could be 50-100% higher than normal. The exact increase will depend on factors like the type of damage, repairs made, your driving record, and the value of the vehicle. You may need to adjust your coverage limits or deductibles to make the premiums affordable.

Provide Documentation of Repairs

If major repairs have been made to restore the vehicle to a roadworthy and safe condition, providing detailed records of the work done may help lower your premiums. Photos of the repairs and a statement from the mechanic who did the work can serve as proof for the insurance company. Ongoing inspections may also be required to maintain coverage.

Consider Liability-Only Coverage

If the salvage vehicle is older or has little monetary value left, liability-only coverage may be your most budget-friendly option. This covers damages to other vehicles and property in an accident you cause but provides no coverage for your own vehicle.

You’ll be responsible for all repair and replacement costs if it’s damaged or totaled. Liability coverage still provides vital financial protection for others on the road.

While finding insurance for a salvage title vehicle can be challenging, taking the right steps and doing your research can pay off. With some persistence, you can get the coverage you need for your salvage car at a price you can afford.

7. Registering a Salvage Vehicle

Once you’ve purchased a salvage vehicle, you’ll need to register it in your name to legally drive it on public roads. Registering a salvage vehicle typically requires a few additional steps compared to a regular used vehicle.

Inspections and Repairs

First, you’ll need to have the vehicle thoroughly inspected by a certified mechanic to determine what repairs are needed to make it roadworthy and safe. Any issues found in the inspection will need to be properly repaired or replaced before the vehicle can be registered. This includes things like:

• Structural damage or frame repairs
• Mechanical issues like brake, steering, or suspension problems
• Airbag replacement or reinstallation
• Bodywork to repair dents, rust, or collision damage

Title Documentation

Next, you’ll need to obtain the proper title documentation for your state. This is usually a “salvage title” or “rebuilt title” that indicates the vehicle’s history. Check with your local DMV for the specific title type required in your area. You may need to provide records of the necessary repairs and inspections to prove the vehicle is now roadworthy.

Registration and Licensing

Finally, once you have the proper title and documentation, you can register the vehicle in your name and obtain license plates. You’ll need to pay all required registration and licensing fees for your state. Some states charge additional fees for registering salvage vehicles. You may also need to provide proof of insurance for the vehicle before you can complete the registration process.

While registering a salvage vehicle requires some extra work, if done properly it can allow you to legally and safely enjoy driving your new vehicle. Carefully following your state’s requirements for inspections, repairs, titling, and registration will help ensure you have a vehicle that lasts for years to come.

If at any point you feel overwhelmed by the process, don’t hesitate to contact a local mechanic or DMV for guidance. They deal with salvage vehicles regularly and can help walk you through each step.

8. The Salvage Retention Process

Once your insurance company has determined your vehicle is a total loss after an accident, they will typically take possession of the salvage—what’s left of your car. At this point, you have a few options for what happens next with the salvage retention process.

Retain the Salvage

If your vehicle still has some value left, you may want to retain the salvage yourself. This means you keep the remains of your vehicle and receive a settlement from your insurance company for the pre-accident value minus the salvage value. You can then sell the salvage to a salvage yard or repair and restore the vehicle yourself. To retain the salvage, you will need to pay any towing and storage fees that have accumulated and the title will be branded as “salvage” or “rebuilt.”

Let the Insurance Company Handle the Salvage

The easiest option is to let your insurance company take care of disposing of the salvage. They will deduct the salvage value from your settlement and handle transferring the title and selling or disposing of the remains of your vehicle. You won’t have to deal with any towing, storage or repair fees. However, you also won’t have a chance to potentially get a higher price for the salvage yourself.

Negotiate the Salvage Value

If you think your insurance company’s salvage value determination seems low, you can try to negotiate it. Get vehicle valuations from Kelley Blue Book and NADA to support a higher price. Check prices for comparable salvage vehicles on sites like Copart, IAAI, and eBay Motors to determine a fair market value.

Be prepared to provide documentation to your insurance company to justify your counteroffer. Negotiating a higher salvage value can mean a bigger settlement for you, even if you let the insurance company handle disposing of the salvage.

The salvage retention process can be complicated, but understanding your options helps ensure you get the maximum amount for your totaled vehicle. Carefully weigh the pros and cons of each choice based on your situation. And don’t hesitate to ask questions—your insurance company and agent should be able to walk you through the steps to make the best decision.

9. Salvage Title FAQs: Common Questions Answered

A salvage title means the vehicle has been declared a total loss by an insurance company after an accident or other incident. This can lead to many questions about what it means for the vehicle and its value. Here are some of the most common salvage title FAQs and their answers:

Q. What exactly is a salvage title?

A salvage title, also known as a rebuilt or reconstructed title, means the vehicle has been in an accident or event that caused extensive damage. The insurance company determined the cost to repair the vehicle exceeded its actual cash value, so they paid out the claim amount to the owner. The salvage title brand is then added to the vehicle’s title history to indicate its status.

Q. Can I still drive a vehicle with a salvage title?

In most states, yes you can still legally drive a salvage title vehicle on public roads after it has been repaired and passes a state inspection. However, some states have additional requirements like a rebuilt title to get it road-worthy again. Check with your local DMV for the specific rules in your state.

Q. Will insurance companies insure a salvage title vehicle?

Some insurance companies will provide liability coverage for a salvage title vehicle, but most will not offer comprehensive and collision coverage. The vehicle is seen as too high risk due to its previous accident history and unknown repair quality. You may need to shop around at companies that specialize in insuring rebuilt vehicles.

Q. How much is a salvage title vehicle worth?

A salvage title vehicle will be worth significantly less than a clean title vehicle of the same make, model, year, and condition. Salvage title vehicles can lose 50-80% of their pre-accident value due to the unknowns of the repairs and title brand. The specific discount will depend on factors like:

• The severity of the damage that caused it to be totaled
• Quality and documentation of the repair work done
• Number of previous owners
• Trust in the current seller and their records

The salvage title will remain on the vehicle’s history permanently, even if it’s repaired to like-new condition. For this reason, most buyers prefer vehicles with a clean title if possible. If buying a salvage title vehicle, make sure to get a vehicle history report and have a trusted mechanic thoroughly inspect it before purchasing.

Conclusion

So there you have it, the basics of what salvage means in car insurance. While the details can get complicated, the core idea is simple. If your vehicle is totaled in an accident, the insurance company will pay you the actual cash value of the car.

They then take ownership of the vehicle. If they are able to sell any usable parts or the entire car, they get to keep that money. It may not seem fair, but that’s how they can afford to pay you the value of your vehicle in the first place.

The important thing is understanding your policy and coverage so you know what to expect if the worst should happen. Stay safe out there!