Classic Car Insurance
Classic car insurance has been available for over 50 years for owners of classic, collector, antique, exotic, and custom automobiles. Yet, more than half of the owners still insure their vehicles through a standard insurance company even though they may be paying a more costly premium and have less coverage. Some estimate that using a company specializing in collector car coverage can save up to 75% and have a less restrictive policy.
A major reason for specialty insurance occurs when having to make a claim. Most standard claims adjusters will not understand why using a specific repair shop or using original parts is so important to protect the value of your car.
Basic Requirements for Classic Car Insurance
While each insurance company has their own requirements, most contain the following items in common:
Most cars must be older than a set number of years (15 to 25).
The car cannot be used for commercial transportation.
You must own at least one other car for “daily driving”.
Generally collector car insurance involves covering an older classic, collector, or antique car. There are now a few underwriters who will cover exotic and customized cars, regardless of the vehicles’ age.
If you qualify, premiums are usually a fraction of the cost of a standard insurance policy. Insurance company underwriting guidelines may include driving usage, special care for the car (such as how it is garaged), good driving records, and few if any youthful drivers. Some brokers market polices nationwide, often including coverage for spare parts and towing.
You are not required to insure your “daily driver” with the same company. You will want to insure your regular car with a standard insurance company and use the specialty insurance for the collector’s car.
Types of Coverage
There are three basic types of coverage. Understanding the differences and selecting the best for your needs will play a very important role should there be the unfortunate need to file a claim. They are:
Actual Cash Value (ACV)
Stated Value (SV)
Agreed Value (AV)
Insurance companies will use one of these three different policy forms. These methods of determining the value of a loss for each is different, misunderstood, and frequently misrepresented by insurance agents.
Actual Cash Value: This is the typical type of coverage in a standard insurance policy and pays a “depreciated” value in the event of a claim. As the vehicle gets older, its value decreases. The insurance claims adjuster decides what the car was worth at the time of the loss. Disagreements can sometimes only be solved with litigation.
Stated Amount: This is the type of policy is often used for collector car policies and is frequently misunderstood. Many "Stated Amount" forms state the insurance company will pay the lesser of:
The Stated Amount
The cost to repair the covered auto not to exceed the “Stated Amount”
The “Actual Cash Value”
The “Stated Amount” only serves to set the maximum amount that will be paid. It does not guarantee you a settlement amount that reflects the value of the car when a loss occurs. The “Actual Cash Value” language allows the claims adjuster to settle your loss for an amount less than the “Stated Amount.” Sadly, most insurance agents are unaware of this detail. Most agents, unaware of the actual policy language, will insist if your collector car is stolen or totaled, you will receive the stated value. Wrong!
Agreed Value: This the type of coverage you should purchase. With this policy you are guaranteed in writing the amount you would actually receive if you car is stolen or totaled. There should be no “Actual Cash Value” clause in the policy. The “Agreed Amount” policy should state that the insurance company will pay you the lesser of: The “Agreed Amount” or the cost to repair the car, not to exceed the “Agreed Amount”.
The “Agreed Amount” should be reviewed carefully with your agent before the policy is issued. Your agent and you must agree together upon the “Agreed Amount” before the policy is issued. The “Agreed Amount” should represent the true market value of the car at the time the policy is written. If the market value changes during the policy period, the “Agreed Amount” can be changed by endorsement. Before policy renewal each year the “Agreed Amount” should be changed, if necessary, to reflect current market value.
Most standard insurance companies do not offer an “Agreed Value” policy.
Additional Coverage: Some insurance programs will allow you to cover specific special equipment with exact replacement from the same manufacturer. Most policies will specify the maximum miles of driving allowed annually and may even restrict you to driving to special events and car club events. Also, as with standard automobile insurance, the deductible amount for coverage of physical damages can vary. Make certain you fully understand the limitations of the coverage before purchasing the insurance.
Claims: Statistically, you are more likely to file a claim for repairs than for total loss from theft or being totaled in a wreck. Make sure your policy allows you to select a qualified repair shop and to use original parts if available.
Be aware that insurance company claims practices vary widely. It is very important to have an Agreed Value policy and an agent with claims authority who understands the insurance risks involved with classic and collectors cars. If your car is stolen or totaled, you need to know in advance how much you will receive.
What is a Collectable Car? The answer is not as clear-cut as it used to be. In addition to the obvious classic cars, many insurance companies are now covering hot rods, muscle cars, vintage pickups, vintage race cars, and exotic sports cars. If you have a vehicle that you are preserving for future value and is rarely driven, contact a company that insures specialty cars and inquire. You save both some money and perhaps future aggravation should you have a claim.
Determining Value: For many of the classic and antique cars, determining the value for insurance purposes is fairly simple. There are several very good price guides both in book form and on-line. Placing a reasonable value on a custom or recently restored vehicle can be more difficult. Keeping receipts for the original purchase plus receipts and records for all work done will prove to be very helpful. Professional appraisers are available who can help resolve the differences of opinion between a car owner and the insurance company. Just make sure this is settled before purchasing the coverage.
Purchasing a Collector Car policy: First, make sure you policy will be underwritten by an insurance company licensed by your state insurance department. Insurance companies are rated based on their financial condition by Best’s Key Rating Guide. Avoid any company that is not rated “A”. Your policy should be written using policy forms approved by your state insurance department.
Be sure that the liability and uninsured/underinsured motorists coverage on your collector car policy is at least equal to the coverage limits on your standard policy vehicle(s).
A few unethical or uniformed insurance agents will tell you not to obtain a separate collector car policy because their auto policy or personal umbrella/excess policy will not allow it. This is misleading and simply not true. If necessary, ask the agent to show you where their policy states you cannot secure a separate auto insurance policy for your “Collector Car.”
One of your most valuable sources of good information and advice is your local car club dedicated to the type of vehicle you want to insure. Look for car owners who have had the misfortune of filing a claim. Ask if they would use the same insurer again. Also, many agents who specialize in collector car policies are active member of the local clubs and perhaps own cars themselves.
Article courtesy of Leland-West Insurance Brokers, Inc.