|Archive Index | Current Issue|
Courtesy of Hagerty Classic Insurance
Insuring classic and collector cars can be confusing for first-time buyers and veterans alike. Many questions arise as to the types of vehicles that can be covered, coverages, costs, claims, etc. McKeel Hagerty, President of Hagerty Classic Insurance, has categorized the most common and important questions, and provided informative and helpful answers.
"We want the car collector and general hobbyist alike to know the realities associated with owning and protecting collector vehicles," comments Hagerty, a leading expert on specialty auto insurance. "Because there are significant differences between specialty and standard insurance programs, we want to provide people with the correct information that will dispel any misconceptions they may have as well as save them a lot of money."
How are most collector cars insured? Less 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.
Are specialty insurance program premiums less than standard insurance premiums? Yes. Standard insurance annual premiums can cost up to 500% more than those offered by a specialty program. Although standard companies provide adequate coverage for the "daily driver," they rarely offer the added benefits associated with collector car programs. One example is that a stock vehicle, valued at $10,000, can be covered by specialty insurance programs such as Hagerty's for as little as $90-95 per year.
Although there are several fine specialty programs, there are differences among them. Levels of service, rates, types of coverage and claims handling all vary from program to program. Anyone insuring a collectible should research all programs before making a final decision. Varying costs should be considered, of course, but should not be the determining factor. Remember, when buying insurance you are buying "service" so first look for quality customer service, excellent claims handling, knowledgeable staff who know and understand collector vehicles, and an overall impression that they care about you as a customer.
What are the different kinds of insurance coverage? There are three types of automobile insurance offered today: Actual Cash Value (ACV), Stated Value, and Agreed Value. ACV coverage is what insures most everyday cars and pays out a depreciated "book" value in the event of a claim; the older a car on an ACV policy is, the less value it has. Some insurance companies offer Stated Value policies for collectibles. These policies are better than ACV because they allow you to "state" a value for your vehicle greater than its depreciated "book" value. But Stated Value can still depreciate vehicles because the policies generally require the insurance company only to pay "up to" the "stated" amount. Only Agreed Value insurance policies guarantee you will get all of your money back in the event of a total loss. There is no depreciation of a vehicle's value with an Agreed Value policy.
What kinds of vehicles are collectible? This is a difficult question to answer briefly, because the market is broadening so rapidly. It's not just Ford Model As, '57 Chevys and Packards anymore. Now, hot rods, muscle cars, vintage pickups, vintage racers, sports cars and even '70s cars are being collected. The old categories of "antique and classic" are still there for the purists, but today people are collecting more and different cars than they used to. Even AMC Pacers are finding a niche within the hobby, especially if they have the Mojave stitched interior option!
Do specialty insurance programs have a vehicle age cutoff? While the old standard used to be 25 years and older, it is always best to inquire on a per-vehicle basis. Hagerty, for instance, takes a much broader view about the age of the vehicles they will insure. There are new cars that are insurable as collector cars. These tend to be exotics and sports cars, however.
Is there specialty insurance for street rods and customs? Yes. But because the very nature of these cars is that each is unique, there are some differences in how they are insured. The difficulty is in determining their value. You can't just look in a value guide to see how much they are worth. So insurers must dig a little deeper into the mechanical and aesthetic modifications made to the car, its horsepower, suspension system, paint scheme, etc. It doesn't take long to determine a value based upon the base value of the car to begin with, then the parts and labor that were added. Quality of the parts and workmanship are important factors. And, in some cases, there is a premium put on cars that were "built" by well known or famous builders.
Do collector car programs impose milage restrictions? Many specialty programs strictly limit owners to driving their collector vehicles to 2,500 miles per year. They may even require annual odometer readings. Hagerty Classic Insurance offers flexible usage guidelines. This means that if a person has regular cars that are driven daily and their collector cars are used on a limited basis consistent with owning a valuable vehicle, then we do not strictly limit the mileage they may drive.
Am I limited to driving my collectible only in parades or shows? What if I want to take a Sunday cruise? Enthusiasts like to share their collector cars with the public, but they also just enjoy driving them around. While some programs require that collector cars are only to be driven in activities of public interest, we also allow for and encourage the private enjoyment of collector cars. Go ahead and take that Sunday drive. Nevertheless, collectors should consider these types of restrictions and find a policy with flexible usage guidelines that best suits their overall needs.
Are there other usage limitations? Yes. Most specialty insurance programs including Hagerty do not allow vehicles to be used for the commercial transportation of goods or passengers, for racing, or for daily transportation.
Are young drivers covered in a specialty insurance policy? It depends. Many specialty insurance companies require that all drivers be 25 and older; some even require that a person be 30 years old. While Hagerty generally will not consider an owner/applicant who is younger than 21, we are somewhat more flexible when a family of collectors has teenage drivers with clean driving records. I, for example, would not have qualified for most programs after my dad and I restored my 1967 Porsche. But I was a great insurance risk. I had a regular-use car, a clean record and I only took my collector car out on nice summer days.
What is the determining factor of computing an annual premium? First and foremost, insurance is regulated on a state by state basis. So there are slight differences from state to state, but generally they are fairly consistent. Physical damage coverage comprehensive and collision makes up the majority of a given premium. This is calculated by the value of the car and its age. For example: the physical damage price on a 1965 Mustang worth $10,000 is $60 with Hagerty; if the car was worth $20,000, then the physical damage rate would be $120. Liability coverages are much more complicated to explain, but fortunately for consumers, they are very inexpensive usually somewhere between $30-50.
What if I have five cars? Do I get a break on my premium? You can. In most states, Hagerty charges a single liability charge no matter how many collectibles someone owns. After all, you can only drive one car at a time!
How do you value a classic? While we are not in the business of appraising cars, we are in the business of insuring the "value" of cars. The first consideration is whether the car is a stock, original vehicle. If so, there are many resource guides and pricing books that can provide value guidelines based upon the overall condition of the vehicle. These are somewhat less useful for newly restored vehicles and even less useful for street rods, because every newly restored car is restored to a different level of perfection and every modified car is different by nature. Our best advice is for people restoring cars or building a street rod to keep detailed lists of the work performed and receipts for all parts and labor. This will help us when attempting to insure the car properly and the whole process will be smoother. Occasionally, appraisals help but they're not always necessary.
Isn't it easier to stay with a standard insurer? Ask yourself the following:
Hagerty Classic Insurance has been in the insurance business for five decades and in the specialty insurance field for fifteen years. As the leading specialty insurer of classic and collectible automobiles in the United States, Hagerty's goal is to provide superior service and programs to its customers. For additional consumer information on collectible car insurance, call Hagerty's friendly, knowledgeable staff at (800) 922-4050 or visit www.hagerty.com.
Editor's note: Sincere thanks to Hagerty Classic Insurance for providing this information. While we encourage our readers to drive their Volvos as regular transportation, some of you may have that "special" car that qualifies for specialty coverage. We do not endorse any particular insurer.