Is It Collector Car Insurance or a Crossword Puzzle?
The answers are not always what your insurance agent tells you ...
It's what agents fail to tell you or don't understand.
by Holly Bromberg
From the book The SL Experience "Five Decades of the Mercedes-Benz SL" The Ultimate SL Resource Book. 358 pages. Over 250 color photos. Hardbound. Full Color. ISBN 0-9635394-2-6
When collectible cars you own are driven only occasionally for pleasure drives, club events, special excursions, maybe 1,000 or certainly under 5,000 miles a year, not used for business, etc., it is time to enroll them in a "collector car" insurance program.
If you are insuring these cars under a standard insurance policy, you should expect problems with claims. Be prepared to deal with a claims adjuster who doesn't understand why using a repair shop of your choice or using original parts is extremely important. Standard auto insurance policies do not guarantee a value for your car at the time of loss. If you wouldn't take your favorite automobile to just any old shop for service, the same is true for its insurance.
There are a few specialty insurance brokers who provide automobile insurance policies designed to cover collectible automobiles for pleasure driving only.
If you qualify, their premiums are usually a fraction of the cost of a standard insurance policy. Insurance company underwriting guidelines may include driving usage, special care for the car (such as how it is garaged), good driving records, and few if any youthful drivers. A few brokers market polices nationwide, often including coverage for spare parts and towing.
First and foremost, your policy should be underwritten by an insurance company admitted to do business by your state insurance department. The insurance company should be "A" rated by Best's Key Rating Guide. The auto policy should be written using policy forms approved by your state insurance department.
The number one source of confusion is physical damage policy coverage. If you obtain a policy using the correct policy form, you'll hit a home run.
Insurance companies will use one of three different policy forms. They are generally known as Actual Cash Value, Stated Value or Stated Amount and Agreed Value or Agreed Amount. Each of these three forms is different, misunderstood, and frequently misrepresented by insurance agents.
Most collectible automobiles have stable values and slowly appreciate over time. Because the values are stable, an "Agreed Value" insurance policy should be obtained to protect your collectible automobiles. Under an Agreed Value policy, if your car is stolen or totaled, you will receive the Agreed Value listed in writing on your auto policy. Ninety-five per cent of all standard insurance companies do not offer an Agreed Value policy.
This form of coverage is typically provided by standard auto policies. The insurance company claims adjuster ultimately decides what your collector car is worth at the time of the loss.
While you may have some input, if you do not agree with the claims adjuster, the insurance company claims adjuster decides the final claims settlement.
If you do not agree with the claims settlement, you may have no alternative but to seek legal action, or, if specified in the policy, arbitration.
This form of policy is frequently and easily misunderstood.
It is often used on collector car policies. Most insurance agents typically represent it as being the same as "Agreed Amount." It is not! The "Stated Amount" form states the insurance company will pay the lesser of:
The "Stated Amount" helps determine the premium cost.
It does not guarantee you a settlement amount that reflects the value of the car when a loss occurs. The "Actual Cash Value" language allows the claims adjuster to settle your loss for an amount less than the "Stated Amount".
Sadly, most insurance agents are unaware of this detail. Most agents, unaware of the actual policy language, will insist if your collector car is stolen or totaled, you will receive the stated value.
This is the only policy form guaranteeing you in writing what amount you will receive if your "Collector Car" is stolen or totaled during the policy period.
Note there is no "Actual Cash Value" clause in the form. The "Agreed Amount" form states the insurance company will pay you, the lesser of:
The "Agreed Amount" should be reviewed carefully with your agent before the policy is issued. Your agent and you must agree together upon the "Agreed Amount" before the policy is issued.
The "Agreed Amount" should represent the true market value of the car at the time the policy is written. If the market value changes during the policy period, the "Agreed Amount" can be changed by endorsement. Before policy renewal each year the "Agreed Amount" should be changed, if necessary, to reflect current market value.
Once you find a program or two offering agreed value for physical damage coverage, compare the extra coverages.
In addition to the car’s "Agreed Value," a few programs allow you to insure special items such as original Rudge wheels, Nardi steering wheels, original matching luggage, or special stereo equipment. Many programs only allow you to drive 2,500 miles annually, but some offer different mileage plans up to 5,000 miles a year, as well as different physical damage deductibles. Some have warranties and restrictions allowing you to drive the car only to special events and car club events.
Read the application carefully. Ask your agent about policy warranties and restrictions before you apply. Each program is a little different. Find one suitable for your driving needs.
The most common types of claims are not from total wrecks or theft. Most claims require you to take your car to a shop for repairs.
Will your insurance company allow you to have your car repaired by a qualified repair shop of your choice that charges more money than a less qualified shop?
Will your insurance company pay more for the repair shop to use original parts if available? Many large insurance companies have been sued and lost enormous lawsuits because they failed to repair damaged cars with original parts. Make sure your car is repaired using original parts, if available.
Insurance company claims practices vary widely. Having an agreed value policy, an agent with claims authority and an insurance company that understands the insurance risk is of paramount importance. If your favorite car is stolen or totaled, you will know in advance how much you will receive.
Many collector-car programs will require you to have at least one other car in your name for everyday use.
Be sure the coverage limits for both liability and uninsured/underinsured motorists coverages provided by the auto policy covering your everyday car(s) match the same coverage limits provided by your "Collector Car" policy. The medical payments limits may vary, depending on what the insurance company's filings offer.
A few unethical insurance agents will tell you not to obtain a separate collector car policy because their auto policy or personal umbrella/excess policy will not allow it. This is misleading and simply not true. There are two key provisions these policies may require of a collector car policy:
I have yet to see an auto or umbrella/excess policy requiring you to insure all of your automobiles with one insurance company. If necessary, ask the agent to show you where their policy states you cannot secure a separate auto insurance policy for your "Collector Car."
Don't hold your breath.
Obtain an "Agreed Value Collector Car" policy through a reputable insurance agent or broker who understands the collectible automobile business. That way, you won't lose any sleep over how a future claim will get settled.
Your agent should have a solid relationship with the insurance company underwriting the policy. A few agents have claims authority to help the insurance company settle claims quickly to your complete satisfaction. Better agents are actively involved in the collectible car hobby.
Many participate in various car clubs' activities. Does your agent have any long-term commitments to any car clubs or car manufacturers?
Why settle for less? If your current insurance agent cannot offer you a true collector car insurance policy with an "Agreed Value" form, find a new agent. Read your policy carefully, and shop around. Spend time comparing all aspects of an insurance policy -- not just its price -- and make sure it suits your needs.