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Is insurance more expensive for a salvage car?

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Here's what you need to know...
  • Insurance is often more expensive for a salvage vehicle than a comparable clear title vehicle.
  • A car may be totaled for several reasons.
  • If you’re considering full coverage on a salvage vehicle, keep in mind the insurance company will only reimburse you 80 percent of its salvage value.
Several different factors dictate how much a person’s car insurance will cost:

  • Location
  • Vehicle type
  • Driving record

The above are just some of the many factors that can either raise or lower premiums.

If you want to buy the best car possible and still maintain a low cost of ownership, you must do your homework before you sign contracts or negotiate.

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When you find the car that you have always wanted to own and you see it listed below market value, it feels like it is meant to be.

Once you discover that your dream car that is listed for sale for a low price has a salvage title, alarms may start to go off in your mind.

A salvage title is not always a deal breaker, but you need to know what it means and how it can affect your insurance before you start to bid the price down with the seller. Read this guide to insuring salvage vehicles, and decide if the deal is worth it in your mind.

What does it mean when a car has a salvage title?

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A vehicle either has a standard title or a salvage title. When you buy a car that holds a salvage title, the seller of the car is legally obligated to disclose this before you sign the bill of sale or you can file a lawsuit.

One of the reasons why sellers are required to disclose that a car is “salvage” is because this classification means that the car once had damages that exceeded 75 percent of its value.

It may be a red flag, but for wise buyers who do their due diligence buying a salvage-title car could be a great way to get a terrific deal. When you are buying a car on a very low budget, you can get a car with great options that would otherwise be out of your price range.

The key is to know what you are buying, what type of damage was sustained, and when the vehicle passed the safety inspection after repairs.

Here are some of the types of damage that can lead to a salvage title:

  • Flood or Hail Damage — Many states require that cars with flood or hail damage be salvaged because they can sustain rust damage even when a restoration company is hired.
  • Recovery of a Stolen Car — When a vehicle is stolen, the insurance company will wait for a reasonable amount of time to see if the car is recovered. If it is never recovered and a claims payment is made, the insurance company keeps the car and can sell it to a salvager.
  • Severely Damaged in an Accident — If a car is in a major accident and the repairs are costly, the car may be salvage. This happens when the resale value of the car is low and there is a major defect following the accident. If repairs are made, be sure the shop that does the repair work is done by a reputable mechanic.

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Does a salvage title affect the price of car insurance premiums?

The cost of insurance for vehicles can go up for several reasons. In most cases, factors that increase premiums make the policyholder a higher risk.

Driving a salvage vehicle can make you a high-risk client, and this is why the premiums might be higher than they would be if the car had not been salvaged.

One of the main reasons why salvaged cars are classified as high-risk cars is because it can be difficult for the insurer to assess how safe the car is to drive.

Even if the car has passed safety inspections and been issued as safe to drive, there could be defects that are hard to spot and that could lead to serious accidents. This is what concerns insurers the most.

Another reason why salvage cars are a sore spot for insurance companies is because they are so hard to value.

When you want to carry comprehensive or collision on your car, you can expect to pay more for that coverage simply because the company cannot easily value the car. In exchange for the difficulty, you will have to pay higher premiums.

If you do just want to carry liability and other forms of protection like medical payments or uninsured motorist, you may not see a change in the premiums because the value is not applicable.

Do all insurance companies cover salvage cars?

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Some companies are very strict with their underwriting guidelines and will not insure any vehicle that has a salvage title. You should research insurers before you decide that buying that salvage car is best.

One of the major reasons why some experts insist that you should avoid buying a salvage car is because they can be so hard to insure.

Many insurers will write liability insurance for vehicles that have passed safety inspections, but they will be reluctant to write a policy with physical damage coverage.

If you can find a good deal and you have verified that there are no major limitations for filing a claim because of the salvage branding, you can proceed and make an offer.

Is it worth it to buy full coverage on a salvage car?

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As you have heard, it can be more expensive to buy comprehensive and collision insurance on a salvage car when you find a company that offers it. While having the full coverage is important to some, you have to wonder whether or not it is worth it.

An insurance company already evaluates the value of a car low, but when the car is salvage you will only get about 80 percent of its salvage value. Many times, this is lower than the cost of the insurance over just a short period of time.

It can be very difficult to decide to buy a car that you know has sustained a great deal of damage. If you have done the research and you plan to keep the car long-term, you can proceed and make a deal on the car.

Be sure to compare the cost of insurance with several companies through an online rate comparison tool and disclose the title status so that you cover all of your bases before buying.

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