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Driving your car after it's totaled

By Karen Aho Posted : 03/06/2012

 Totaled car needing salvage titleA totaled car need not be retired to the junkyard, left to be stripped of its parts and dignity, and crushed into a cube the size of a foot locker.

With some loving tweaks, a vehicle once pronounced dead by a car insurance company may enjoy a meaningful second life on the road. At the least, it could get you to where you need to go.

For those without the funds to buy another car this is good news. (In times of high unemployment, Americans tend to hold on to their cars longer, according to the Property Casualty Insurers Association of America)

But if you do go the repair route, don't forget the red tape involved with process. Making sure the car is mechanically safe is critical, but it's also important to ensure the car is street legal and properly insured.

This means obtaining some form of salvage title and salvage title insurance, which may offer limited auto insurance coverage but need not be more expensive just because the car has been previously damaged.

What  does totaled mean in the world of car insurance?

"Totaled" may conjure up images of a car flattened like an accordion, with no chance of rehabilitation. And that's understandable; most of us hear the term only in the context of extremely bad wrecks.

But in the world of insurance, "totaled" is more an issue of straight math.

Let's say your car is damaged badly in a crash. If the cost to repair the vehicle exceeds the car's  pre-crash market value -- the amount the car would have sold for right before the event -- the insurer will declare it "totaled." You'll be paid the market value in cash, minus your deductible. (See our related article, "Refined Kelley Blue Book offers more accurate values for car insurance payouts.") (Of course, you won't be paid anything if you do not have the comprehensive or collision coverage required to cover those events.) The insurance company will take the damaged car and sell it to a salvage yard.

Some insurers will declare the vehicle a total loss if the cost of repairs reaches more than 80 percent or 90 percent of the actual value.

Should you choose to keep the damaged vehicle--and most states allow you to do this -- the calculated salvage value will be deducted from your insurance payout. Still, depending on the situation, that may leave you with a car that you can repair and continue to drive.

The title is only as good as the car

If you keep a car that has sustained any significant damage, either you or the insurance company -- it varies by state -- must report the damage to the state's department of motor vehicles. These laws are intended to protect would-be buyers, who might otherwise be unaware of the underlying extent of a vehicle's damage.

Under the National Motor Vehicle Title Information System, established in 2008, insurance companies and salvage yards must submit information on vehicles damaged by crash, fire, flood or other calamities. DMVs and police have access to the data. The public also can access this information  for a fee.

"Every state has rules that if the car's damaged there's a threshold -- usually between 70 [percent] and 80 percent - - if the damage is more than that percentage of the car's actual cost value, then the car must have a salvage title," says Bob Passmore, senior director of personal lines for the Property Casualty Insurers Association of America, a trade group.

A salvage title may be branded with different descriptions, depending on the state and the type of damage. These include:

  • Salvage
  • Flood damage
  • Fire damage
  • Rebuilt title
  • Inoperable or non-repairable
  • Total-loss vehicle


Can I get car insurance?

Before spending money on repairs -- and forfeiting the salvage portion of the insurance payout -- place a call to your insurance agent.

For example, State Farm, the country's largest auto line, won't insure a car that State Farm itself has declared a total loss. So if you want to stay with your current company – for instance, if you want to keep a multiline discount – and you have State Farm insurance, you may be out of luck. State Farm will, however, insure a salvaged car that has been totaled out by another insurer.

"We do not ask on our application whether the vehicle has a salvage title, but we do ask whether it has prior damage," says Dick Luedke, a State Farm spokesperson. "Depending on what is on that vehicle, we sometimes do an inspection. In either case we determine whether we'll provide liability coverage and, if so, if we'll also provide comprehensive or collision."

Some states require that the insurance company conduct a vehicle inspection first, as an anti-fraud measure.

Obtaining full coverage can be difficult, if not impossible. Insurance companies are understandably wary. If there's an accident, how will they know that reported damage wasn't actually the result of prior events? And, if you are able to find comprehensive or collision coverage, the insurer will only value the car at its worth after the calamity and before repairs.

However, if you can live with liability coverage alone-- which may be all a salvaged car is worth, anyway – you may be able to find coverage at a price that's comparable to that on your other vehicles.


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