This article was published in the January 12, 2012 issue of “Old Cars Weekly News & Marketplace.” If you are contemplating insurance coverage for your classic car, the following article may give you some insight on what to look for and what to avoid. If you have questions contact Mile Elam at Continental Western Group.
How do you Protect Art on Wheels?
Finding the Right Coverage for Classic and Collectible Vehicles
Okay, so maybe a 1962 Ferrari 250 GTO might not be considered “art” in the same way an original Picasso is, but insuring a classic car properly is just as important to the owner. Much like with the sophisticated insurance market for fine art, the best choice for insuring classic and collectible vehicles is usually a company that focuses exclusively on this varied and growing niche. At the end of the day, the most important thing is that you find an insurance company that provides you the attention you deserve and the options that you need.
An Expanding and Dynamic Market
One of the great characteristics of the collectible vehicle market is that it’s expanding by the week. Cars, trucks, motorcycles, military vehicles and even farm tractors are being repaired, restored and turned into collector’s items by people across the country. Not only are more vehicles, and types of vehicles, entering the collectible marketplace, but existing collections of vehicles are changing hand more frequently, making this one of the most dynamic markets out there.
The recent popularity of televised auto auctions and car shows has contributed to the interest in collectible vehicles. This phenomenon has brought more people into the market, both as buyers and sellers, as well as creators and fabricators. You just need to take a quick stroll up and down your TV channel lineup to find at least a couple shows dealing with some aspect of the classic car hobby. This media attention on all aspects of vehicle restoration and collecting has produced an increase in overall interest and participation by an increasing number of people.
As the stock of what are considered “collectible vehicles” has continued to grow organically, the demographics of the traditional collectors have also contributed to the dynamism of the market. We seem to be reaching a point in time where some of the early accumulators of classic cars are liquidating their collections through public auction. In some cases people have decided to realize the relatively stable investment gains that these collections have produced of late. In other cases the collectors have simply passed on and the estate needs to distribute the collection. In any case, former collections of all types of vehicles are being disbursed to more and more people, expanding the pool of collectible vehicles and the need for specialized insurance options for owners.
Coverage is NOT all the same!
The thing you don’t want to do is continue insuring your “pride and joy” on a standard auto insurance policy with Actual Cash Value physical damage coverage. If you do, you may pay more in premiums and not get the coverage you truly need. Most personal auto insurance policies offer coverage for vehicles on an Actual Cash Value, or “ACV” basis. This means the most that will be paid for a total loss is the blue book value. As the car ages it depreciates in value and the insurance company is obligated to pay only what the standard auto value guides show. If the car was in great shape prior to the loss and had low mileage, in the event of a total loss, the client may get high book value but it’s still based on the standard auto guides for vehicles which decrease in value as a rule.
Some companies offer a ‘Stated Value’ coverage endorsement for cases where a vehicle is clearly valued at something other than that indicated in the usually vehicle pricing guides. Many policyholders have the mistaken impression that the stated value coverage means they will get that amount in the event of a total loss, only to be disappointed when it’s time to collect. In most cases, stated amount coverage simply puts a ceiling limit on the amount to be paid, not a guarantee of that stated amount. What the endorsement does do is allow the insurance company to develop a premium based on the increased value of the car.
Stated Value coverage forms vary from company to company, so you must read the policy carefully to make sure you’re providing what your client really wants. Look for wording on this endorsement which says the company is obligated to pay the ‘lesser of’ the stated Value on the policy or Actual Cash Value. If your coverage reads that the company is obligated to pay the “lesser of” these two amounts, you should consider looking into a specialty collector car insurance program with a company that writes “Agreed Amount” coverage.
Agreed Amount coverage is the best way to insure collectible vehicles. This type of coverage provides a guaranteed pay-out of the amount shown on the policy if there is a total loss to the vehicle. There are a number of specialty insurance companies that offer Agreed Value Coverage for antique and collectible autos and motorcycles. These companies typically have experts that follow the collector car industry and know how to identify values for collectible vehicles. The underwriting process involves the company expert working with the agent and the vehicle owner to determine an appropriate value for the vehicle, considering any and all restoration and modifications made to the vehicle. Color photos of the vehicle and sometimes appraisals are used to help establish the values of the vehicles.
The specialty companies which offer Agreed Value coverage also understand how well the collector vehicles are cared for and how seldom they are used. They understand that hobby car owners treat their vehicles with great pride so the risk is much lower than normal, daily driven, vehicles. The limited use of these vehicles translates into limited risk relative to regular daily-driven vehicles, so the insurance company can usually charge extremely low premiums and the ability to insure an unlimited number of collectible vehicles on one policy.
As with most specialty insurance programs companies can vary significantly, so be sure to check with a couple before making your decision. For example, at Continental Western Insurance, we have designed our program based on the fact that these cars are typically driven only a few months each year. This ‘built-in’ discount eliminates the need to call the agent twice a year to let them know when the vehicle goes into storage and when it comes back out of storage. Under this program the vehicle is covered year round so it can be driven any time. As the policyholder, you can allow your spouse, or any experienced driver you chose, to operate the vehicle and they will be covered. The CWG program also has monthly, quarterly, or semi-annual payment plans available.
While you may not think of every vehicle being collected today as being “art”, we understand that owners hold them in the same regard as that Picasso or Ferrari. The key to finding the best overall insurance value for your collectible vehicles of all kinds is to work with a specialty company that knows the market and has experience writing and handling these types of unique collectible vehicles, like Continental Western Group! If you have any questions about insurance for your collectible vehicles, contact Mike Elam at Continental Western Group at 800-603-3330, or email at email@example.com.