Can You Drive a Financed Car Without Insurance
A totaled car need not be retired to the junkyard or 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 where you need to go.
But making sure the car is mechanically safe is only the first step you need to take. To legally drive a car that was totaled, you will need to ensure that you have notified state authorities, obtained the appropriate "rebuilt" title, and purchased new insurance. All of this can be done easily enough.
KEY TAKEAWAYS
- A car is considered totaled if the cost to repair exceeds the car's actual value before the crash
- If you decide to keep your totaled car, the insurance company will pay you the pre-crash value of the car minus deductible
- You can ensure your totaled car after the repair but getting full coverage car insurance will be difficult
- If you want to keep your totaled car, either you or your insurer must report the damage to the state's department of motor vehicles.
How do I know if my car is totaled?
"Totaled" may conjure up images of a car flattened like an accordion. But this is typically not the case, particularly given the high cost of some repairs.
That's because in the world of insurance, "totaled" is a question of math: 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. In nearly every other state, however, insurers can make their own determination or, where states do dictate a loss percentage, insurers are not required to declare a car a total loss unless the repair costs exceed 75% or more of the car's pre-crash value, according to a review by Matthiesen, Wickert & Lehrer, S.C., a law firm with offices across the country.
If your vehicle is determined to be totaled, your insurer will pay you the pre-crash market value, minus your deductible. That is, as long as you have comprehensive or collision coverage on the vehicle.
Can I keep my totaled car?
Yes, in most states you can keep your totaled vehicle. If you are fully insured and you decide to keep your totaled car, your insurance company will pay you the pre-crash value of the car minus your deductible and minus the amount the insurance company would have received by selling your totaled vehicle to a salvage yard.
Things to Keep in Mind When Keeping Your Totaled Car
If you're considering salvaging your totaled vehicle, there are some factors that you'll want to consider before you decide. You don't want to end up wasting money by thinking that your car can be repaired when, it will be more costly than simply buying a replacement vehicle.
Cost of Repair:While insurance companies are experts at calculating damages and determining the cost of repairs, you need to be sure that you're getting your car repaired for a reasonable price. Find a reputable mechanic and have them inspect your vehicle, and then review with them the damages and costs associated with repairing the vehicle.
Insurance:Insurance companies may be reluctant to insure your vehicle after a crash or accident. It is because the vehicle has been given a salvage title. You will be able to secure liability coverage, but it may be impossible to receive more comprehensive policy options.
Resale Value:If you own a salvage vehicle, your car's resale value will drop by 20% to 40%. Even if you buy a new car down the road, you may have difficulty selling the old one.
State Laws:State laws vary, but if you live in a place where it is legal to keep your totaled vehicle even if it is not drivable, you should know that insurance may still pay out the vehicle's value. Your insurer can help you decide whether to keep your totaled car.
Financing:If your vehicle has been financed and you haven't paid for it, technically, you don't own it, and you should not be taking it home. The bank will still own it until its loan has been paid in full.
Is repairing a totaled car worth the effort?
You very well might opt to keep your totaled car if you think you can repair it and it will still operate safely. Consider, for example, that hail damage is primarily cosmetic but that the high costs of repair can easily total even a newer car. Or, if your car is older, that even a modest fender-bender can total it out even though the car is otherwise mechanically sound.
Remember, how much damage it takes to total a car depends on the car's pre-market value and the cost of repairs. This is an economic determination that has little to do with whether the car is road-worthy.
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 of the underlying extent of the 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. The data is available to DMVs, the police, and, for a fee, to the public, as well.
Depending on the extent of the damage, the vehicle may be required to have a "salvage" or "rebuilt" title. "States have different names, descriptions and qualifications for a car to have been salvaged and then made roadworthy again. In general, we refer to this as a rebuilt title but the language by your state and insurer may be different, such as 'reconstructed,'" says Penny Gusner, a senior consumer analyst for insurance.com.
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
Keep in mind, however, that a car with a salvage title cannot be driven. You must obtain a "rebuilt" or "reconstructed" title before hitting the road. That will prove that the vehicle has passed a state-mandated safety inspection.
Can I insure a car that was totaled?
You can insure a rebuilt 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 tend to offer liability only," says Gusner. "It is harder to find an insurance provider that will offer the owner the option of adding on comprehensive and collision."
The insurance company may want to do its own inspection first, or get a statement from a mechanic saying that the car is roadworthy.
For example, State Farm, the country's largest auto line, 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.
"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."
Is it worth insuring a car that has been totaled?
Keep in mind, though, that even 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, making any payout far less valuable. In addition, coverage could even be more expensive, simply because fewer companies offer it. "With less competition, rates can be higher," says Gusner. "Companies that cater to high-risk drivers and are willing to insure rebuilt vehicles typically have higher rates compared to companies that insure safe or standard risk drivers and vehicles – as in a car with a clean title and driver with clean driving record." As such, it may make sense to live with liability coverage alone.
Another factor to keep in mind is that a car that has been salvaged and rebuilt can be very hard to resell, meaning it's probably only worth driving a car that's been totaled if you really are the one who wants to keep driving it.
Can an insurance company force me to total my car?
Yes, the insurance company has the rights to do so because state laws regulate when vehicles need to be totaled. Negotiating with your insurer about the car's value is your only option to avoid a total loss.
A car is considered a total loss when the cost of repairs equals or exceeds either the vehicle's pre-crash value or a threshold determined by a state's Department of Motor Vehicles (DMV).
When dealing with insurance companies, it's important to keep in mind that the actual cash value of a car includes factors such as depreciation and mileage, not just the amount you paid for it.
What can I do when the insurance company wants to total my car?
It can be difficult to argue with your insurance company if you feel that your vehicle was worth more than the ACV chosen by your insurer. However, by understanding the total loss threshold set by your state, it may be possible to show that your car was worth more.
To create a realistic estimate for the value of your car, you need to conduct an independent appraisal on the vehicle by a licensed expert and provide photographic evidence of any upgrades or modifications that you have made to the car or of any comparable vehicles that are being sold at the time.
If your insurance company is not in line with your assessment of the market value of your vehicle, you can seek help from the state's insurance regulator. You can also move forward with legal action, but legal costs are likely to exceed any monetary gains you may receive.
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. Even though it might still function, a car with a salvage title will have difficulties passing safety inspections that most states require to be licensed for the road.
You will need to have the car inspected before getting a new title and registering it with the Department of Motor Vehicles.
Can You Drive a Financed Car Without Insurance
Source: https://www.insurance.com/auto-insurance/auto-insurance-basics/totaled-cars-and-titles.html