How to Insure a Car with a Rebuilt or Salvage Title
Cars with salvage titles have been declared a total loss and can’t be driven on public roads, so you can’t purchase insurance for one. However, once a salvage car has been refurbished and tested it can qualify for a rebuilt title—meaning it can be registered, driven and sold. Most insurance companies offer liability insurance for rebuilt salvage cars, so you can buy as much coverage as needed to drive the vehicle legally. However, few insurers will sell full coverage insurance for rebuilt salvage cars, as it’s difficult to assess all existing damage to the vehicle.
What is a Salvage Title?
A salvage title—or branded title—is given to a car after it has been declared a “total loss.” This is distinct from a “clean title”, which is what cars have if they’ve never suffered serious damage, had the odometer altered, or been determined to have a defect. Total loss happens when a vehicle suffers significant damage, and the cost to repair it exceeds a certain percentage of the car’s actual cash value. The level of damage for a car to be considered a total loss varies by state and auto insurer, but it’s typically between 60% to 90% of the car’s value. For example, in Oregon, the threshold is 80%, whereas it’s 100% in Texas. Your insurance company is typically the one that makes the declaration.
Once a vehicle is declared a total loss, it’ll be issued a salvage certificate, which means that the vehicle cannot be registered or driven on public roads. After getting the salvage title, insurance companies auction off the vehicle to rebuilders or salvage yards. If the car is rebuilt, and passes an inspection—the depth of which varies by state—it can then be issued a rebuilt title.
Difference Between a Rebuilt and Salvage Title
Before you buy a car, you need to determine if it has a clean, salvage, or rebuilt title. Often, you can determine what type of title a car has by the title’s color. However, the color designations vary by state. In most states, a green title is clean, a blue title is salvage, and an orange title indicates the car is a rebuilt salvage. You typically can’t purchase a salvage car—unless you’re authorized to do so—but can buy a rebuilt salvage from any private seller.
A rebuilt title is different from a salvage title as it indicates that, though the car was previously declared a salvage, it has passed the necessary qualifications to be driven in your state. There’s nothing inherently bad about a car that has a rebuilt salvage title, and many are reconstructed to a standard that’s near that of a factory. However, the quality of the rebuild can be hard to determine unless you’re quite familiar with cars. Since each state has its own standards for a rebuilt title status, it’s important to get your own inspection done, as some don’t require tests beyond checking for parts and basic functionality.
A mechanic should be able to help you understand if there are any major problems with the car, or if it’s road-ready. It’s common for cars with a reconditioned or restored titles to have a fair number of refurbished parts, but there shouldn’t be issues as long as the parts are in good condition and none are missing.
Difference Between a Non-repairable and Salvage Title
In some cases, a car is damaged so severely that it’s declared unfit to be driven, even if it was substantially repaired. If this is the case, the car is given a non-repairable title instead of a salvage title. Since there’s no way to restore the title, a non-repairable car cannot be used for anything other than parts.
Can You Insure a Car With a Rebuilt or Salvage Title?
You cannot insure a car with a salvage title since these vehicles can’t be driven on the road. Cars with rebuilt salvage titles can be insured, but the process is more difficult than for cars with clean titles.
Most insurance companies will write a liability policy for a rebuilt title car, but are often hesitant to extend a full coverage policy. Since it’s already challenging to assign an accurate value to a rebuilt salvage title car and the insurer may not be able to determine whether damages were due to a particular incident or already existed, it’s harder to secure optional coverage—such as collision and comprehensive. According to Kelley Blue Book (KBB), a rebuilt salvage title car is typically worth 20% to 40% less than one that has a clean title. If you make a comprehensive or collision claim on a rebuilt salvage car, you should be prepared for a much lower insurance payout from your carrier.
Another issue is the higher risk of safety concerns. Reconditioned salvage title cars may have issues that were not addressed in the restoration process and can lead to dangers on the road. For example, a mechanic might overlook certain structural or alignment issues, or even skimp on certain procedures during the restoration to boost profitability. Car insurance companies realize the risks of this situation, and often assume rebuilt salvage title cars will be more likely to result in an insurance claim.