Question: Several months ago my son he hit a deer and our insurance carrier totaled his car. We bought it back for $500 and put only liability on it. The other day, he was almost involved in an accident (not his fault). This made us interested in just how an insurance company would have dealt with the situation if his car had been hit. Would an at-fault driver's insurance only pay us the "junk value" of $500 for his rebuilt-title car?
Answer: You may have only paid $500 to buy back your son’s totaled out vehicle, but if you put money into the vehicle to repair it, it’s likely the car would be worth more than what you paid to buy it back if it were totaled out again.
The car, however, would definitely be worth less than the same model year car that has a clean title.
As you know, when you buy back a vehicle that was declared a total loss by an auto insurance company it’s normally given a branded title, such as a salvage title, to show any future owners that the car was totaled out. The branded title makes the car less valuable and harder to insure with physical damage coverages of collision and comprehensive. (See our top questions on salvage and rebuilt titles)
Since your son is now driving the car again, it would appear that you repaired damages to the vehicle and followed your state laws to change over the salvage title for a rebuilt title, which shows that the car has been declared roadworthy again. It also appears that you carry only liability coverages on it. (See “Is it time to drop comp and collision”)
Whether your car has a clean or rebuilt title, normally as long as a vehicle’s repairs cost are more economical for a car insurance company than to pay out the value of the car, the insurance company will choose to repair the car – even if the car has formerly been totaled out.
Also, the way in which a car with a rebuilt title is determined to be a total loss is not really any different than a car with a clean title, it just has a lower value due to its history and this makes its chances of being totaled out higher.
A car’s actual cash value (ACV), what an insurance company pays out for a totaled car, isn’t determined by what a person paid for a car. Instead, the payout is determined by a car’s true market value at the time of the accident.
To know what you would be paid for your son’s car, you need to determine its fair market value at this point in time. Kelley Blue Book says that the rule of thumb for the auto industry for salvage/rebuilt title cars is to deduct 20 to 40 percent of the car’s blue book value; however, insurance companies typically go on a case-by-case basis to determine the real fair market value for a branded-title vehicle.
I’d suggest you contact local dealers and find out what they say your son’s car is worth with its rebuilt title. A used-car dealer should have a good idea of what one would pay for rebuilt-title cars compare to cars of the same model that have a clean title. Then you’ll have an idea of what you’d receive if your son’s car were to be totaled out – again