Can You Put Full Coverage Insurance on a Salvage Title?

A salvage title indicates a vehicle has been declared a total loss by an insurance company, meaning the cost to repair the vehicle exceeds a certain percentage of its market value.

Understanding a Salvage Title

A salvage title is issued when an insurance company determines that repair costs outweigh a specific threshold of the vehicle’s pre-damage market value. This threshold varies by state, often ranging from 50% to 95% of the vehicle’s actual cash value. For example, if a vehicle valued at $10,000 sustains $8,000 in damage, an insurer might declare it a total loss. Damage can stem from severe collisions, extensive hail, flood immersion, or unrecovered theft. Once a vehicle receives a salvage title, it is generally not legal to drive on public roads, nor can it be registered or insured for typical use.

Navigating Full Coverage for Salvage Vehicles

Obtaining full coverage insurance for a vehicle with a salvage title is generally not possible. Insurance companies typically refuse comprehensive or collision coverage for these vehicles because they are considered unroadworthy and pose a high risk. A vehicle with a salvage title cannot be legally driven or insured until its status changes.

For full coverage to become a possibility, the vehicle’s title must first be upgraded from “salvage” to a “rebuilt” designation, or a similar state-specific term. This rebuilt title signifies that the vehicle has undergone necessary repairs, passed required inspections, and is deemed safe and roadworthy. The process involves restoring the vehicle to a safe operating condition and then submitting it for a state-mandated inspection.

Even with a rebuilt title, securing full coverage can be challenging, and not all insurers will offer it. Insurers perceive rebuilt vehicles as higher risk due to their history of significant damage. While some companies may offer comprehensive and collision coverage for rebuilt titles, others might only provide liability.

Factors Influencing Insurability

Once a vehicle has obtained a rebuilt title, insurers will consider several factors before offering full coverage. They often require extensive documentation to verify the quality and completeness of repairs, including receipts for all parts and labor performed by certified professionals.

State-mandated safety inspections are a prerequisite for a rebuilt title. Insurers may also require an independent appraisal to determine the vehicle’s current market value, which serves as the basis for any potential claim payouts. This appraised value is often significantly lower than that of a comparable clean-title vehicle.

Not all insurance companies are willing to insure rebuilt titles. Premiums for rebuilt title vehicles are typically 20% to 40% higher than for clean-title vehicles due to increased risk and difficulty in assessing true market value. Even if full coverage is obtained, payout limits in the event of a claim might be reduced, reflecting the vehicle’s diminished actual cash value.

Alternative Insurance Options

When full coverage for a rebuilt salvage vehicle proves difficult to obtain, alternative insurance options exist. The most common option is liability-only coverage. This type of insurance covers damages and injuries you might cause to other parties in an accident, but it does not provide any coverage for damage to your own vehicle.

For owners of rebuilt vehicles, some specialty insurers might offer more tailored solutions beyond basic liability. These companies may provide more comprehensive options, though they could come with specific conditions or higher costs.

In situations where comprehensive or collision coverage is unavailable or expensive, an owner might consider self-insurance for their vehicle’s physical damage. This involves the owner accepting the financial risk for any damage to their own vehicle, meaning they would pay out-of-pocket for repairs or replacement.