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Its a given that everybody wants to save money on insurance, and classic insurance is no exception. Not infrequently someone gets the idea of lowering their Agreed Value in order to cut down the premium. You can cut it down a LOT on a classic insurance policy because the premium for such policies is often loaded on the physical damage portion. Liability charges tend to be very light. So the savings can be both substantial and tempting.
Don't do it. Here's an example of why: Lets say you have a nice older Porsche 911S that is worth about $100,000. You seldom drive it and consider your liability risk to be negligible, but the law makes you insure the thing, so you need to find coverage. To keep your costs down on this seldom-driven weekender, you find someone who will insure it for an Agreed Value of ... lets say $50,000. You just saved a bundle on your insurance and you still have full Liability coverage for when you wat to drive it.
Here's where you get into trouble: You just made it very easy for a minor or moderate traffic incident to turn your car into a total loss. The parts and labor to repair that car are going to add up VERY fast. Since a car is declared a total loss if only a fraction of its insured value is needed to repair it, you could be looking at losing a $100,000 car after only perhaps $40,000 in damage. With an older car, you may have a good shot at getting the thing repaired on a budget with parts you and your internet forum buddies help you scrounge up. But for those who try this with a newer automobile, the situation is much more grim.
When the classic insurance company does write you a check... if the car is financed you'd better not owe more than the lowball value you attached to the car. Certainly buying another one with the insurance money is also out of the question. and guess what? For its part the classic insurance provider is going to make back all of their loss selling your car at a salvage auction... which is cold comfort indeed to the former owner.
Classic insurance providers are not in the business of making money off of vehicle salvage sales. For this reason and others (not the least of which is the bad will generated by the above situation), classic insurance companies will typically insist on some form of co-insurance threshold. In other words, they won't let you lowball the value beyond a certain point. Consumers who want to do this despite the risks may think the classic insurance provider is just trying to dig more money out of them, but in the end the company is doing the right thing for the consumer, who has set themselves up for an ugly fall.
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