When Does Insurance Salvage a Car?

Whether you have been in an accident or you are considering buying a vehicle that has a salvaged title, the first question many people ask is “when does insurance salvage a car?” An insurance company uses a variety of methods to determine if the car is salvage. In order to ensure that an unsafe vehicle is removed from the roadways, every insurance company is required to follow the state-mandated rules for total loss vehicles.

How is the Salvage Value Calculated?

When determining the car salvage value, one of the first methods used by the insurance company is to determine if the cost to repair the vehicle exceeds the trade-in value suggested by the Kelly Blue Book. For example, if it will cost $7000 to repair the car and the trade-in value is about $3000, the car will be declared a total loss by the insurance claims adjuster.

The insurance adjuster will often take other factors into consideration as well, such as the condition of the interior and the market in which the owner of the vehicle lives and/or use a third-party vendor database. It is important to note that even if the car can be repaired and the owner of the car wants to repair it, most state laws require the insurance company to declare the car a total loss.

When Does Insurance Salvage a Car?

Although the most common reason a car is thought to be salvage is due to a collision, there are different kinds of damage and/or reasons why the insurance company may salvage a car, including:

  • Hail damage in some states, a vehicle that is damaged by hail may also get a salvage title if the state does not have specific “hail damage” specifications on the insurance document.
  • Flood damage-a car that is flood-damaged may sometimes get a salvage title. In some states, the title may say “flood damage”, while other states use the term “salvage”. In this situation, the insurance company has determined the car received damages that deem the vehicle unsafe to drive, even after “drying out”.
  • Theft recovery-if a car has been stolen and is missing for a specific amount of time, the insurance company will pay off the car. However, if the car is later recovered, a salvage title may be issued by the insurance company.
  • Vandalism-if a car is overturned, spray painted or sustains other significant damage the insurance company may declare the car salvage and issue a salvage title.
  • A non-repairable-a car that is severely damaged, non-operable and with no resale value, instead of a salvage title, the car may be considered “junk”. In this situation, the state will not allow the vehicle to be repaired, so it must either be destroyed or sold to a scrap yard.

In some situations, the owner of a salvage car can buy the car back from the insurance company or the insurance company may choose to sell the car to a repair shop or an auctioneer. If you are considering buying a vehicle that has a salvage title, it is important to understand that it means the vehicle isn’t presently in drivable condition. However, in some situations, a car with a salvage title can be bought and repaired, but salvage must be changed to “rebuilt” on the title. So, it is important to make sure, all repairs are complete and that the vehicle is in drivable condition before buying a car with a “rebuilt” title.

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