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How to insure a car with a salvage or rebuilt title

Salvage or rebuilt title cars are cheaper than your average used car, but insuring them is trickier

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Are you currently scouring the market for a used vehicle to purchase? If so, you may have come across cars branded with a salvage or rebuilt title. These designations indicate the car has sustained considerable damage in a past incident, based on an assessment by the previous owner’s insurance company.  

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If you’re keen on getting a great bargain, though, these vehicles can be enticing, especially if the damage is primarily cosmetic. Salvage or rebuilt title cars typically sell at a substantially lower price than your average used car. 

However, purchasing this type of vehicle also comes with some drawbacks, one of which is the increased difficulty of acquiring insurance coverage. 

Here’s how to go about insuring a salvage or rebuilt title car. 

What’s the difference between a salvage title car and rebuilt title car?  

A salvage vehicle has been deemed a “total loss” by a licensed insurance provider following a collision, natural disaster, riot, or other incident. This means that the cost to fix the car exceeds, or at least comes close to, its market value. As a result, it’s not worth it for the insurance company to cover the damage.  

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You cannot register, drive, or insure a salvage title vehicle in Canada until it is repaired, inspected, and deemed safe, according to the Insurance Bureau of Canada. And unless you put in the necessary work to restore it, the salvage title remains intact indefinitely. 

A rebuilt title car is one that was initially assigned a salvage title but has undergone extensive repairs and passed a rigorous inspection to ensure it’s safe to drive. 

The regulatory standards that a salvage vehicle must meet to obtain a rebuilt title vary from province to province.  

Some, like New Brunswick, follow closely the minimum nationwide requirements set forth by the Canadian Council of Motor Transport Administrators (CCMTA). In contrast, others, like Alberta, have their own unique rules. 

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Any vehicle that qualifies for a rebuilt title can be legally registered, driven, and insured, and its rebuilt status never expires.  

How does a salvage or rebuilt title car affect your insurance? 

Obtaining insurance for a rebuilt salvage title car can be tricky. Some insurance providers may be hesitant to provide coverage for these vehicles, given the increased risk and uncertainty they elicit. 

First, they may have concerns about hidden defects that mechanics may have overlooked during the restoration process, particularly safety-related ones. These obscure issues could make the vehicle more dangerous to operate than it appears, increasing the risk of you filing a claim following a collision or other serious incident. 

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Second, there’s the risk of the vehicle experiencing further damage in the future, as its structural or mechanical integrity is already compromised, making it more likely to break down again. 

Third, determining the car’s value, which tends to plummet once it inherits the salvage title, can be a formidable task for an insurance company. The provider may decide it’s more prudent to decline coverage altogether since accurate appraisals are crucial to estimate insurance payouts. 

Suppose you do get approved for a policy. In that case, your insurance provider may assign you a higher annual premium to offset the added risk it assumes by insuring a rebuilt title car. 

While it’s still possible to obtain a favourable rate, you can expect a lower payout should you file a claim, given the car’s greatly diminished value. 

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In addition, your insurance provider may offer only third-party liability coverage in your policy, or the minimum required by law in your province. You may be ineligible for collision or comprehensive coverage. 

What to do if you plan on insuring a salvage title car 

Obtaining insurance coverage for a rebuilt salvage title car isn’t easy, but you can vastly improve your chances of landing a solid deal by following these tips: 

  • Obtain the original repair estimate for details about the past damage (with photos) and the work completed to restore the vehicle. 
  • Select a licensed and reputable repair shop to fix the vehicle and keep all receipts as proof. 
  • Have an expert mechanic conduct a thorough inspection of the vehicle to confirm that it’s safe to operate. 

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  • Get an independent appraisal done so you can judge whether the value established by an insurance company is fair.
  • Consider the potential consequences of only having third-party liability coverage.  

Salvage and rebuilt title cars typically have poor resale value, so if you’re keen on purchasing one, expect to drive it until it completely falls apart.  

For this reason, it’s also wise to shop around and compare car insurance rates from multiple insurance providers — that way, you won’t get saddled with a hefty premium for years to come. 

LowestRates.ca is a free and independent rate comparison website that allows Canadians to compare rates from 75+ providers for various financial products, such as auto and home insurance, mortgages, and credit cards.