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What Is Classic Car Insurance?

By Alex LaRue, LaRueClassics.com

As those of us who love classic cars are sometimes painfully aware, this is not a cheap hobby. Fortunately there is one important thing you can do to save money.

Protecting your vehicle with specialty classic car insurance rather than placing it on your standard automobile policy is one of the easiest and most sensible ways to control the cost of our hobby. Here are several reasons why collector car insurance is almost always a better and more affordable choice:

  • Your antique or collector car is generally not used for day-to-day driving, so the collision damage premium is usually much lower.

  • For the same reason, liability coverage is much more affordable. Your seldom-driven classic car qualifies for a far lower liability rate than the car you drive to work every day.

  • In many cases, you can set an "agreed value" for your classic vehicle so that in the event of a loss, you'll be paid in full rather than receive the depreciated value that standard policies offer. This is an important issue considering that many classic cars are over twenty years old and fully depreciated – which translates to "worth very little or nothing" in the eyes of a standard auto insurer.

  • The best collector car policies make only one charge for liability – even if you have dozens of cars in your collection. This just makes sense. After all, you only drive one vehicle at a time!

  • Specialty classic car policies generally cover rare and pricey replacement parts –including spare parts like an extra set of wheels – that might be stolen from your garage or damaged in an accident.

  • Some classic car policies offer free towing and roadside assistance – including a fuel refill if you run out, and a free tire change in the event of a blowout.
Specialty collector coverage can actually reduce your premium by as much as 80% compared to what you are paying now to protect your classic vehicle on the family auto policy.

How much can you save? You could insure a 1929 Ford Model A with an "agreed value" of $15,000 for as little as $100 per year … a stock '65 Mustang valued at $10,000 for just $110 per year … or a 1957 Chevrolet Bel Air with an "agreed value" of $15,000 for $154 per year.

I'll fully explain "agreed value" in a moment. Later, I'll provide an in-depth look at the Bel Air policy so you can get a better feeling for the numbers involved in a specific case.

Surprisingly, fewer than half of all collectors understand and take advantage of the benefits of specialty classic car insurance. This article will explain how it works.

Deciding if Classic Car Insurance
Makes Sense for You

The first step in deciding whether the switch to classic car insurance is right for you is to evaluate your personal situation. This is not particularly difficult. You need to answer three questions:

  1. Does your vehicle qualify?
  2. Do you (and possibly your family) qualify?
  3. Does your vehicle's environment qualify?

Does Your Vehicle Qualify?

State insurance regulations set the basic definition of a classic vehicle. This varies from state to state, but generally, a classic is defined as 1) a vehicle built by the original manufacturer – not a reproduction -- which, 2) is at least 20-25 years older than the current model year, and which, 3) has been preserved or restored to be generally consistent with the original design and engineering specifications.

Having discussed the basics, specialty coverages for collector vehicles offer great flexibility.

Insurers differ on what they will cover, but by shopping, you'll find specialty insurance for antique and classic cars, vintage motorcycles, race cars, show cars, muscle cars, and classic trucks.

Insurance for customs and street rods is also available, although the underwriting process tends to be more complicated because they don't have a "Blue Book" value.

Some companies also insure "exotics" – late model, high value cars, such as Corvettes, Porsches, and Lamborghinis if they are treated as collector vehicles and only driven on special occasions. If you are fortunate enough to have one of these treasures in your stable, you too can save money on insurance – providing of course you have another car for the daily commute.

Although replicas don't meet the strict definition of a classic, some companies will cover them. Finally, if your vehicle is not roadworthy yet, coverage is available for cars under active restoration.

Do You Qualify?

This addresses the personal issues. How do you and your family plan to use the collector vehicle?

Usage and Annual Mileage - The daily driving limitation is fundamental to all classic car coverages. Collector policies are based on the idea that you own one or more other vehicles for daily use.

Some policies limit you to driving the vehicle in club events, parades, and shows. Other more flexible insurers allow a limited amount of pleasure driving. With their policies, you can take your vehicle for a Sunday drive. Of course, annual mileage restrictions are generally imposed – often 2,500 miles per year. Having said that, some companies are more flexible than others in regards to the mileage requirement and don't impose a strict limit.

Age of Drivers - In general, vehicles covered by specialty policies must be operated by an experienced driver with a good driving record. Most specialty insurers will not consider drivers under 25. Some require that drivers be 30 or more. However, other companies are more flexible. Some even allow teenage children in collector families to drive the vehicle if they have very good driving records.

Other Limitations – Not surprisingly, specialty classic car insurance is written for private collectors. In general, insurers will not cover vehicles used for public livery – transport of paid passengers or goods. Another typical restriction prohibits use of a covered vehicle in competitive events.

Does Your Vehicle's Environment Qualify?

Garaging your collector car can be an issue. Many policies require that the vehicle be stored in a secure, locked garage. Some require that the garage be heated during winter months.

You Need to Understand How Insurers
Value Your Classic Car

Insurance companies appraise the value of a vehicle in different ways. Here's a very brief overview of how the physical damage portion of auto insurance policies is determined. Basically, there are three approaches:

Actual Cash Value – This is the formula generally used for standard auto insurance policies. It takes into account the original value of the vehicle and the monthly/annual depreciation in value to determine the "actual cash value" of the vehicle were it totaled today. In very simple terms, this is the "Blue Book" value of the car if it is destroyed.

This approach is reasonable for your family cars, but not the best – or even appropriate for collector vehicles.

Stated Value –
This is one method used by specialty collector insurance providers. Basically, it allows you to state the value of your vehicle at the inception of the policy. At inception, your stated valuation may be greater than the book value of the vehicle and accepted by the insurer. However, "Stated Value" policies give the insurer the right to pay only "up to" the stated amount, so in the event of a loss several years from now, they can claim that the vehicle's value was reduced by depreciation and pay the reduced amount.

Agreed Value Coverage – Like Stated Value Coverage, Agreed Value lets you state the value of your vehicle at the inception of the policy. However, in an Agreed Value policy, the value of the vehicle is fixed – without depreciation. In the event of a loss you receive the entire value of your vehicle. Some insurers will even index the agreed value to the annual inflation rate.

Here Are Some Other Things to Consider

As a sensible shopper, here are a few other matters you should take into account when selecting an specialty classic car insurance agent:

Service – You should choose an agent who provides dependable service at every stage of your relationship. As a collector, this means choosing an agent who understands the special considerations of collectible vehicle insurance. You should expect to work with a specialist team that understands classic and collector vehicles.

Claims – In the event of a claim, you should be confident that your agent and insurer will provide prompt, efficient response. Be sure to ask these questions. What is the insurer's procedure for responding to claims? What is the typical time for resolution of a claim?

You should also find a comfort level with their claims staff. Would the claims people you speak with understand your particular situation as a collector? Will they understand your vehicle? Obviously, their understanding is much better if you are relying on an agent who specializes in classic and collector cars. Nevertheless, some are better than others.

What Can I Expect to Pay for
Classic Car Insurance?

At this point, you may be saying, "OK, OK, but what is the cost?" The best way to provide a perspective on how affordable classic car insurance can be is to offer a specific example.Many of the issues discussed so far in this article have been general in nature. By now, I'm sure you are ready for me to offer specifics. I will do so by providing hard numbers for a typical collector car.

Let's suppose that you want to insure a 1957 Chevrolet Bel Air with an "agreed value" of $15,000. Again, "Agreed Value" means that you and the insurer agree $15,000 is a fair replacement value for this classic vehicle at the time you purchase coverage.

The annual cost of this classic car insurance policy would be $154.

Here's what would be included:

  • $15,000 Replacement Coverage on the Vehicle, the full "agreed upon" value, if it is totaled. This particular policy includes inflation protection so if the value of the collector car appreciates in future years, you are protected for the greater amount.

  • No Deductibles. In the event of a mishap, you will not be expected to pay anything from your own pocket before the insurance protection kicks in.

  • 50K/100K/50K Injury and Property Damage. This means that in the event you are found to be at fault in an accident, the policy would provide up to $50,000 in liability protection for you to each person injured up to a limit of $100,000 per accident and $50,000 in liability protection for you to cover property damage caused by the accident.

  • Uninsured/Underinsured Motorist Coverage. This feature protects you in the event that you are involved in an accident with another motorist who is uninsured or underinsured.

  • Towing/Labor. The policy pays for the cost of towing and labor should your vehicle become disabled.

  • Spare Parts Coverage. This benefit provides protection for spare parts – such as an extra set of wheels – that become damaged in an accident or are stolen from your garage.

  • 24-hour Per Day Claims Service.

  • A Reliable Insurance Company.

There are some qualifications on this policy and its pricing. Here are the important ones:

  • 3,000 Mile Annual Driving Limit. This is a generous allowance for most classic car owners who only drive the vehicle for recreation.

  • The Car Must Be Stored in a Locked Garage.

  • Driver Restrictions – There is a limit on this policy of two drivers per household, each with a minimum of 10 years driving experience. Neither can have more than one accident or violation.

This policy is available in most states. The example is offered to help you understand the savings available through specialty collector car insurance. As you consider this example and the ones referenced in the link below, please bear in mind that an actual quotation you receive would depend on many variables that characterize your unique situation and needs.

Click this link if you'd like to see some more examples of typical classic car insurance rates. The linked page offers sample rates for a wide range of collector vehicles including a 1929 Ford Model A, a 1987 Chevy Monte Carlo SS, a 1995 Corvette Convertible, a 1940 Ford Street Rod, a 2003 Dodge Viper – and yes, even a 2003 Ferrari 550 Maranello with a $270,000 value.

Classic Car Insurance Is Flexible.

Every car collector has different needs. Almost all of the qualifications and benefits described in this article can be changed to suit your special needs. Naturally, these tweaks will affect the policy cost – either upward or downward -- so you should carefully consider how important some issues really are to you. The best way to do this is to discuss your situation with an experienced classic car insurance agent.

© 2013, LaRueClassics.com, a unit of LaRue Insurance Agency, Inc.

 
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