You can insure a vehicle that's been declared a total loss. It’s possible to keep your car after it’s been totaled, and if you do keep a totaled car, you'll have to insure it to get it back on the road after repairs. Total loss car insurance is harder to find, but it can be done.
Car insurance companies may require proof that a totaled car is road-worthy and often offer only liability coverage for the car.
Below, we’ll help you understand how a rebuilt title affects insurance and what you need to do to get a salvage title car insured after a total loss claim.
Key takeaways
- A car is considered totaled if the cost to repair exceeds the car's actual value before the crash.
- You have the right to keep your car after a total loss, but the insurance company will deduct the salvage value from your payout.
- Car insurance for a salvage title car is more difficult to find, costs more and is often liability-only.
Can you insure a totaled car?
You can insure a total loss vehicle, but obtaining full coverage car insurance can be difficult, if not impossible. Companies that write car insurance policies for a vehicle with a rebuilt title or salvage title tend to offer liability only.
The insurance company may want to do its own inspection or require a statement from a mechanic saying that the car is roadworthy.
For example, State Farm may insure a vehicle previously declared a total loss and issued a salvage title with comprehensive and collision coverage if the vehicle has been repaired, subject to underwriting and file development. However, you may have to find a new insurance company to insure a totaled vehicle.
“State Farm won't insure a car that State Farm itself has declared a total loss,” says Benjamin Palmer, a State Farm spokesperson. “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.”
How does a rebuilt title affect insurance?
Insurance for a rebuilt car is more expensive, usually because the insurance company is taking the risk that the car wasn’t repaired properly or fully and could be a danger on the road.
If you have a car with a rebuilt or salvage title, you will also likely find it difficult to get full coverage insurance. While a car can be totaled twice, the value of a previously totaled vehicle is much lower. You won’t see the same amount of money the second time around.
Is it worth insuring a car that has been totaled?
If you have a totaled car that is still drivable or you have repaired it, you will have to insure it to be on the road legally. Liability insurance is required by law in most states, so whether you’re driving a totaled car or a brand-new one, you need insurance.
However, in most cases, it’s not worth it to carry full coverage insurance. That’s because a car with a salvage title has lost most of its value. This might not be the case if you have a collector car.
During repairs, if your car is in a garage and non-operational, you probably don’t need to insure it.
What is a total loss?
A total loss is a car that the insurance company determines, based on its calculation of the car’s value, isn’t worth repairing.
If it will cost more to repair the car than it was worth before the crash, the car is considered totaled. And the repair costs typically need not even be that high. In Iowa, for example, state law requires that an insurance company declare a vehicle as “salvaged,” or totaled, if the repair costs would exceed just 50% of the vehicle’s pre-crash value. Other states have higher thresholds, many at 75% or using what’s called a total loss formula (TLF) to calculate the value vs. the repair cost.
If your vehicle is determined to be totaled, your insurer will pay you the pre-crash market value, minus your deductible, as long as you have comprehensive or collision coverage on the vehicle.
Can you keep a totaled car?
One of the options for a totaled car is to keep it, which is legal in most states. If you keep your salvage vehicle, you will be paid the actual cash value of the car minus the salvage value and the deductible.
The salvage value is the amount the insurance company would have gotten from a salvage yard for your car. Since you’re keeping the car, you won’t be paid that amount.
If you're considering salvaging your totaled vehicle, there are some factors that you'll want to consider before you decide.
- Cost of repair. Is it worth it to repair a totaled car? The insurance company didn’t think so.
- Insurance. Find out if you can insure the car and what it will cost.
- Resale value. Your car will be worth a lot less after salvage.
- State laws. Make sure it’s legal in your state to keep your totaled vehicle even if it is not drivable.
- Financing. You may need the insurance payout to cover your loan.
Can you drive a car with a salvage title?
If your car has a salvage title, you can't legally drive it on the road until you’ve had the car inspected, gotten a new title and registered it with the Department of Motor Vehicles. The title on a car that has been repaired and inspected may be called a rebuilt title rather than a salvage title. The formula for total loss cars depends on the state.
Once you have done this, you will need to get the required insurance in your state to drive the car.
Do I need to notify the DMV if my car is totaled?
If you decide to keep a car that has sustained any significant damage, then 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 that the car was totaled.
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. The data is available to DMVs, the police, and, for a fee, to the public.
