I own a Salvaged Vehicle. Can I Insure It?

May 31, 2018
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The simple answer is yes, you can insure your salvaged vehicle but there are restrictions.The simple answer is yes, you can insure your salvaged vehicle but there are restrictions.

Before we talk about the restrictions, what is a salvaged vehicle? Let's say you are involved in an auto accident in your beloved 2015 Toyota Corolla. The damage to your car is pretty substantial. Your claims adjuster works with appraisers to determine the total cost to fix your car. The adjuster also determines the actual cash value of your car. This is the current value of the car before damages. If the car were new, it would be the cost new minus any depreciation. To determine the current value of the car, the adjuster uses a number of sources such as Kelley Blue Book, other vehicle valuation publications, the internet, auto sales sites for price comparisons, etc.

If the cost to repair your car exceeds the current value of your car, the insurance company deems your car to be a "total loss" and gives you two options. First, you can accept a check from the insurance company minus your deductible to use to purchase another car. Or, you can keep the car and accept a lower amount from the insurance company (by keeping the car, the insurance company loses the ability to sell parts from the car to mitigate the loss). If you elect to keep the car, it will be labeled a salvaged vehicle by the California Department of Motor Vehicles (DMV).

So, can I insure the salvaged car? You can but in the event of another accident which damages the car, you can expect to get only about half of what you would have gotten had the car never been damaged before. You must als

What are the pros and cons of a salvaged vehicle?o prove that any safety concerns the insurance company may have are taken care of to the satisfaction of the insurance company.

Pros:

  • The price of a salvaged vehicle will be a fraction of what the vehicle would have cost had it never been damaged. We occasionally have clients who purchase a salvaged vehicle at a great price but expect a claims payout to be what they would have received had the car not been totaled in an accident. It doesn't work that way. The insurance company is responsible for making you "whole". That doesn't mean giving you twice the value of the car in the event of a 2nd total loss.
  • You can save money by repairing a totaled vehicle as opposed to buying a new car.
  • If you enjoy rebuilding cars, buying a salvaged vehicle can be a really good deal. Personally, I have no skills in this area.

Cons

  • A salvaged vehicle may have damage that compromises your safety.
  • The salvaged car may have hidden damage that you did not notice initially.
  • It may be more difficult finding auto insurance since fewer companies will insure a salvaged vehicle.
  • There are additional documentation requirements, including safety and mechanical inspections before registration or insurance policies can be put into effect.

Before you buy a salvaged car, ask the following questions:

  1. Why was the car totaled?
  2. What are the state laws and requirements regarding insurance and registration?
  3. What kind of insurance coverage can I get?
  4. Is the salvaged car really safe?

A good rule of thumb is to call your insurance agent before purchasing a salvaged vehicle. It's good to know what you are getting yourself into before making the purchase.

--Ken May