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Car insurance and vehicle history
Car insurance is designed to be broadly applicable enough to cover every vehicle make and model, yet specific enough to be priced uniquely for every driver. It's not just your driving record that will impact your insurance rates: your vehicle’s history can also affect your premium. If your car has been totaled and salvaged, insurance companies sometimes view your vehicle as a risk — and be less likely to insure it. Car insurance affordability also can vary significantly depending on whether you finance, lease, or own the vehicle.
Car insurance by vehicle history:
- Salvage title car insurance
- Owned vehicle car insurance
- Insurance for leased cars
- Additional resources
Salvage title car insurance
A salvaged vehicle title basically means the vehicle was totaled, repaired, re-inspected and deemed drivable by the state. Certain states are known as “total loss formula” states (TLF), while others are known as “total loss threshold” states (TLT).
- Total loss formula: if the cost of repairs plus the scrap value of the vehicle is greater or equal to the actual cash value of the vehicle.
- Total loss threshold: if the total value of the damage exceeds the value of the vehicle.
Because of the risk inherent to rebuilding a totaled vehicle, salvage title vehicles are often deemed too risky to insure. Many major insurance companies do not offer car insurance for salvage titles. If you're looking for the cheapest car insurance for a salvage title, consider the following:
- Consider non-standard, smaller insurance companies. They'll be more likely to provide salvage title car insurance.
- Do not lie about your vehicle’s salvage title status. It will inevitably come up in the quoting process — save yourself some time and disappointment by telling the truth up front.
- Consider as many companies as possible. With a salvage title, some companies will overcharge you, while others could offer affordable premiums. The only way to find affordable insurance is to shop for it.
Without a doubt, the most difficult and expensive vehicle to insure is one that has been totaled and salvaged. To avoid the hassle of acquiring insurance with a salvage title, be sure to check the Vehicle Identification Number (VIN) before buying the car. Using the VIN to run a motor vehicle history report will show the vehicle's past claims and accidents. From there, you can decide whether it's worth purchasing — and attempting to acquire insurance for — the car. The easiest ways to obtain a motor vehicle report are online through Carfax or via a VIN check.
For more information, see our indepth article covering car insurance for a salvage title vehicle.
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Insuring a vehicle you own
Owning your vehicle outright can be liberating: you aren't shelling out hundreds of dollars per month on a lease or car payment. As an added bonus — depending on the value of your vehicle — you could save on car insurance. Although the status of your vehicle — owned, financed, or leased — doesn’t explicitly impact your car insurance rate, owning your car gives you additional control over how you insure it.
When you finish paying off your car loan, remove the lien information from your car insurance policy. This ensures any claims will be paid out to you in the event your vehicle is damaged or totaled.
The primary ways in which your insurance changes when you own your car relate to comprehensive and collision coverage and the corresponding deductibles. While these coverages aren’t required by your state, you should maintain them if your vehicle is valuable. As a general rule of thumb, if your vehicle is worth more than $4,000, you should carry comprehensive and collision coverage.
If your vehicle is worth less than $4,000, perform some cost-benefit analysis to decide if this level of coverage — and expense — is necessary. If your vehicle is worth more than $4,000 but you’re looking for ways to save, consider raising your deductibles.
If you lease your vehicle, you'll probably be required to keep your deductible at $500 or below. If you own your car, you're free to raise your deductibles at will. By raising your deductibles, you can lower your up-front car insurance costs.
AVERAGE CAR INSURANCE RATES BY COVERAGE TIER
|Coverage Level||Average Annual Premium|
Loans and leases require you to keep your deductible low: a lower deductible encourages you to file a claim and repair the damage (your dealership wants any damages fixed — it's technically their car, after all). Unfortunately, filing a claim often leads to inflated insurance costs. Most insurance companies will raise your rates for three years after an at-fault accident. Depending on your location and nature of the claim, this rate hike can be significant. By raising your deductible, you lower your up-front premiums while decreasing the financial incentive to file a potentially costly claim.
Other than the deductible flexibility, owning a vehicle doesn’t change your car insurance situation too much. If you're looking for more information, see our guide to auto insurance for a paid-off vehicle.
Car insurance for leased and financed vehicles
If you’re leasing or financing a vehicle, your car insurance situation is at the mercy of your contract. The principal rule of car insurance is that you need to have an insurable interest in the vehicle. Since your bank or leasing company has an insurable interest, they have a say in how you insure the car.
This means they’re going to require a lot more coverage than you might elect on your own. Common policy add-ons for leased or financed vehicles include gap insurance, very low deductibles, and forced insurance.
What is gap insurance?
Gap insurance protects you from going underwater on your car loan. If you were to total a financed or leased vehicle, your insurance company would factor depreciation into your claims payout. This would leave you on the hook for the remaining balance of the loan. For example:
- You have a loan for $45,000.
- You total your leased vehicle but your insurance company now values that make/model at $38,500, thanks to depreciation.
- Gap insurance would cover the $6,500 owed on the remainder of your lease.
Gap insurance is fairly expensive. Some insurance companies, such as GEICO, don’t offer it.
What is low-deductible car insurance?
Most loan or lease agreements will require you to maintain low deductibles on your financed vehicle. While it depends on the details of your agreement, insurer-mandated deductibles typically range from $250 to $500.
What is forced insurance?
Another tricky aspect of financing a vehicle is forced insurance. Because a bank or leasing company has vested interest in your vehicle, they can force you to acquire coverage and stick you with the bill. Forced insurance coverage tends to be much more expensive than getting the vehicle insured yourself — and it can be difficult to remove. Read your loan agreement carefully and provide proof of insurance for the duration of your loan.
Additional resources: car insurance and vehicle history
While car insurance is designed to accommodate all vehicles, your car's history will impact its insurability today. While covering a salvaged vehicle may be tricky, you can shop for a policy from a non-standard company. If you own a vehicle, remember to remove the lien information from your policy and assess the feasibility of raising your deductibles. If you’re leasing or financing a vehicle, you’ll want to make sure you thoroughly understand your agreement to avoid any unnecessary penalties.
Regardless of your vehicle's status, consider as many companies as possible to try to find the best rates. Get started by using our car insurance search engine today.
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About The Zebra
The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.
- The Zebra’s insurance content is written and reviewed for accuracy by licensed insurance agents.
- The Zebra’s insurance content is not subject to review or alteration by insurance companies or partners.
- The Zebra’s editorial team operates independently of the company’s partnerships and commercialization interests, publishing unbiased information for consumer benefit.
- The auto insurance rates published on The Zebra’s pages are based on a comprehensive analysis of car insurance pricing data, evaluating more than 83 million insurance rates from across the United States.