Collector Car Insurance: The Basics

Table of Contents:

• What You Should Know
• Standard vs. Specialty Insurance
• Types of Policies
• Restrictions
• What's Covered
• Terms to Know
• Selecting a Specialty Provider

What You Should Know

You finally found the car you've wanted your whole life. So now what? The next step is to protect your investment. There are a lot of choices out there, but a basic auto policy may fall short for your collector car needs. This article offers the basics on collector car insurance and provides guidance in selecting proper coverage for your collector, as well as an appropriate provider.

Standard vs. Specialty

Standard insurance annual premiums can cost a great deal more than those offered by a specialty program provider who better understands the nature and purpose of a collectible vehicle. Although standard companies can provide adequate coverage for a daily driver, they rarely offer the added benefits associated with collector car programs. In most cases, you'll pay a significantly higher annual premium with standard insurance, and the coverage will be inferior. Additionally, you'll probably pay fees for liability coverage on each vehicle, whereas a specialty policy may only charge a single liability fee for your entire collection.

According to Hagerty Insurance, fewer than half of the collector vehicles on the road today are insured by specialty programs. Although collector car insurance has been available for five decades, most owners of collectibles, specialty cars and street rods are still insuring them through a standard insurance company despite the higher cost and often more restrictive policies.

When your collector is driven only occasionally for pleasure drives, club events, special excursions, perhaps 1,000 or under 5,000 miles a year and not used for transporting passengers or for business, it's time to enroll those cars in a "collector car" specialty insurance program. The basic premise of collector car insurance is that you have a daily vehicle that's insured elsewhere, and m any collector-car programs will require you to have at least one other car in your name for everyday use. There are several specialty insurance providers available to suit your needs and usually, it's cheaper to insure a classic/collector car than it is to cover a new vehicle.

Types of Policies

Insurance companies will use one of three different policy forms. These are:

• Actual Cash Value. This policy coverage insures most everyday cars and pays out a depreciated "book" value in the event of a claim. With this coverage, the insurance company claims adjuster ultimately decides what your collector car is worth at the time of the loss making this an undesirable form of coverage for collectible cars that have a tendency to appreciate.
  
• Stated Value. Policies that allow you to "state" a value for your vehicle greater than its depreciated "book" value. One important factor to remember is that a Stated Value can still depreciate vehicles because the policies generally require the insurance company only to pay "up to" the "stated" amount.
  
• Agreed Value. Insurance policies that guarantee you'll get all of your money back in the event of a total loss. There's no depreciation of a car's value with an Agreed Value policy. Most collector cars have stable values and slowly appreciate over time. Because the values are stable, an "Agreed Value" insurance policy should be obtained to protect your collector cars. Under an Agreed Value policy, if your car is stolen or totaled, you'll receive the Agreed Value listed in writing on your auto policy. You simply agree on the value of your collector car with the insurance company. In the event of an accident, you'll be covered up to the dollar value of the policy. This type of coverage is the way to know in advance how much you'll receive from an insurance company if your car is totaled or stolen. With Agreed Value, you'll get the amount listed on your policy, which is also the basis of your premium. The insurance company will pay you the lesser of: the agreed amount or the cost to repair the covered auto, not to exceed the agreed amount. Finally, the agreed amount should represent the market-reflective value of the car at the time the policy is written. If the market value changes during the policy period, the agreed amount should be changed by endorsement. Before a policy renewal each year, the agreed amount should be changed, if necessary, to reflect current market value.

Restrictions

Collectors should consider the types of restrictions that accompany a specialty policy and find one with flexible usage guidelines that best suits their overall needs. While many specialty programs strictly limit owners to driving their collector vehicles to 2,500 miles per year, some providers offer more flexible usage guidelines. For instance, if the insured has a daily driver in addition to his/her collector vehicle, the mileage on the collectible vehicle may not be strictly limited — assuming it's driven on a limited basis consistent with owning a collector. Something else to keep in mind is that most specialty insurance programs don't allow vehicles to be used for the commercial transportation of goods or passengers, racing or daily transportation.

What's Covered

While the popular standard used to be 25 years and older for vehicles covered, it's always best to inquire on a per-vehicle basis. There are new cars that are insurable as collector cars — including kit cars, replicas and modern classics.

• Exotics. Coverage for exotic vehicles, whether new or collectible, is available. Exotics that are considered collectible vehicles and won't be used on a regular basis are easier to cover, due to the fact that it generally indicates the car will be garage kept and maintained.
  
• Street Rods and Customs. The uniqueness of these vehicles lends to some differences in how they are insured. The difficult part is determining the actual value of these custom vehicles. The quality of the parts used, as well as the workmanship employed, is an important factor which isn't easily valued in every case. Often there can be a premium placed on a vehicle that was constructed by a w ell-known or famous vehicle builder. It's also recommended to get your street rod or custom appraised by a licensed appraiser for its actual cash value.
  
• Young drivers. Many specialty insurance companies require that all drivers be 25 and older; some even require that a person be 30 years of age. Some providers will be more flexible on the age limit, but generally won't accept an owner/applicant younger than 21. There are, however, some specialty insurers that will allow a driver as young as 18, so make sure to inquire.
  
• Multiple vehicles. Depending on the coverage provider, a single liability charge is applied regardless of how many collectibles are in your collection. After all, you can only drive one car at a time.

Terms to Know

An auto insurance policy is made up of different coverage and, while the exact requirements vary from state to state, these descriptions explain the basic types offered.

• Physical damage coverage. Also known as comprehensive and collision, makes up the majority of a given premium. This is calculated by the value of the car and its age. In the event of an accident, your vehicle may be protected by comprehensive and collision coverage, which includes theft and vandalism, as well as physical damage.
• Liability coverage. Typically this is relatively inexpensive and is usually between $30 and $50 regardless of the number of vehicles in question.
• Medical coverage. You and your passengers may be covered by medical payments coverage, no fault (Personal Injury Protection) and/or uninsured and underinsured motorist protection.
• Bodily injury and property damage liability coverage. Damage you may accidentally cause to other people, their cars and their property.
• Towing. Get a policy that includes towing — specifically, flatbed towing, which makes it far less likely that your collectible vehicle will be damaged.

Selecting a Specialty Provider

As insurance is regulated on a state-by-state basis, premium computations vary slightly throughout the country. Anyone insuring a collectible vehicle should research all of the options available before making a final decision. Rates are a consideration, but should not be the determining factor. When buying insurance, it's vital to remember you are buying service. First look for quality customer service, excellent claims handling and a knowledgeable staff that understands collector vehicles. For example, a specialist insurer knows why the windshield of your '56 Corvette costs $3,000 — and knows where to get one — as opposed to a standard insurance agency, who figures the same ‘shield should only cost $500 and, unfortunately, will only pay up to that amount.

Also take into consideration whether the insurance company is skilled at servicing collector car claims. "A collector car program should have dedicated claims adjustors who know collector cars,'' says McKeel Hagerty, CEO of Hagerty Insurance . “It's not in the total loss; it's in the partial loss. It's where the better programs shine.''

First and foremost, your policy should be underwritten by an insurance company certified to doing business by your state insurance department. Furthermore, the auto policy should be written using policy forms approved by your state insurance department.

To find out more about Hagerty Insurance for the collector car — and collector boat — markets, please contact your local agent. You can also call Hagerty at 800-922-4050 or visit http://www.hagerty.com/.

  — Kristen Kazarian, Editor at Hagerty Insurance Agency.