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Flood-damaged cars may pose safety risks — and auto insurance risks

Water-damaged cars are one of the concerns left in the wake of floods, hurricanes and other natural disasters. And those cars can lead to maintenance and auto insurance woes — for storm victims and for people who live nowhere near the water-soaked catastrophes.

“Flood-damaged cars often don’t show physical signs of damage,” says Chris Basso, a spokesman for vehicle history information provider Carfax. “The real problem is that water gets into the soft parts of the car and these cars literally rot from the inside out.”

auto insurance flood cars

A water-damaged car could experience a multitude of problems, ranging from electrical complications to malfunctioning airbag systems. While a water-damaged car may look fine in the used car lot, it may start to smell and rust once you get it home, says Roger Morris, a spokesman for the National Insurance Crime Bureau.

In most states, when a car is severely damaged or an auto insurance company declares a vehicle a total loss, that vehicle must be issued a salvage title, a form of branding that makes it known that the car has major safety issues. Some people buy salvaged vehicles for the parts while others have them fixed so they can be driven again. “It is buyer beware,” Morris says.

Warning signs of water damage

For years, natural disasters have left a glut of flood-damaged cars on the market. For instance, the combined effects of hurricanes Katrina, Rita and Wilma in 2005 produced more than 600,000 flooded cars, according to Carfax.

To identify potentially problematic vehicles, Carfax offers a free flood check, and the National Insurance Crime Bureau allows someone to figure out whether a car has been declared as salvage by entering the vehicle identification number (VIN) online. In addition, the U.S. Department of Justice oversees the National Motor Vehicle Title Information Center, a database that includes information on titled vehicles throughout the country.

However, some unscrupulous people go to great lengths to get around registering a car as a salvaged vehicle, says Pete Moraga, a spokesman for the Insurance Information Network of California. In that state, for example, a severely damaged vehicle must have a salvage title, but in many cases “someone will go to another state that doesn’t have the same law and they’ll register the car there. Then they’ll bring the car to California so when it gets re-registered, there’s no way of knowing if that car’s been salvaged,” Moraga says.

There are other signs that a car may have a questionable past, such as an extraordinarily low price like $15,000 for a car that should be priced at $25,000. “If it sounds too good to be true, it probably is,” Morris warns.

Other ways to spot damage:

• Look under the hood for dirt or debris, as well as a water line around the engine block.

• Check the trunk for water lines or signs of standing water.

• Check under the seats for rusting nuts and bolts.

• Look at the wires underneath the dashboard; wires that have gotten wet become brittle and can crack.

• Turn on the air conditioner to check for a musty, damp smell.

• Make sure the accessory and warning lights and gauges come on when you turn on the ignition.

• Have a trusted mechanic look over the car before you buy it.

A common misconception is that flood-damaged vehicles are a major problem only in areas where flooding occurs, Basso says. Actually, he says, “more of these cars are moved to areas where flood damage isn’t as prevalent because people aren’t looking for them there.”

The auto insurance factor

If you knowingly purchase a salvaged vehicle, you likely can get it insured, although some auto insurance companies may first inspect the car to make sure it has been safely repaired before offering coverage, according to Moraga. Other insurers may refuse to provide full collision or comprehensive coverage, depending on the condition of the car.

If you buy a salvaged vehicle unknowingly and get into a car accident or need to file an insurance claim and it comes to light that the vehicle had been totaled at one point, remember this: Whether your insurance company pay ups is largely a legal issue. “If that car was not registered properly and had a phony VIN on it, then there could be issues,” Morris says.

If you discover that you’ve unknowingly bought a flood-damaged car, the National Insurance Crime Bureau recommends these two steps:

• Hire a competent attorney.

• Contact the consumer fraud division of your state attorney general’s office.

“When a vehicle is misrepresented as having a clean title, you get into issues of consumer fraud,” Morris says.