Insuring Your Collector Car

M. PETER NEUMANN, Founder and CEO, Chrome Strategies Management, LLC 

The collector’s first step in deciding how much to insure their car for should be to determine how much it is worth, either through research by the vehicle owner or by retaining a qualified appraiser. 

The only worry associated with insuring it for too much would be a higher annual premium, whereas the worry associated with insuring it for too little would be that you would not be made whole in the event of a loss. 

Rising prices in the current market should be factored into the decision as to what would be considered appropriate coverage. Equally important as to the dollar value would be the type of insurance coverage to be considered. Agreed-value policies and actual-cash-value policies are the two options most often offered for consideration. 

With an agreed-value policy, the value of the vehicle is determined at the time that the policy is bound. In the event of a total loss, that is what you will get paid. This eliminates any risk as to the payout, but it puts the onus on the vehicle owner to make sure that the policy limits are in line with the current value of the car. With these types of policies there are often restrictions as to how the vehicle may be used. 

With an actual-cash-value policy, the value of the vehicle is determined at the time of the loss, which means that the vehicle owner does not necessarily have to monitor the value of the vehicle, and there are usually few use restrictions with this type of policy. Unfortunately, when a loss takes place, vehicle owners are often not happy with the insurance company’s opinion as to the value of their car. There are procedures for disputing these values, but they can be time consuming and expensive, and there are no guarantees. 

SAM GRUNDY, President, Grundy Insurance

Valuing your car can be a tricky process. While there are many experts and valuation tools out there, the only real expert on your car is you. At Grundy Insurance that theory lies at the heart of our valuation process. We let our customers pick a value and if we agree that it is realistic, it is approved. This is where the term “agreed value” comes from. 

Our underwriters use tools like the CPI Black Book and SCM Platinum Auction Database to make sure that we don’t under- or over-value a car, but in the end the valuation is normally up to our customers. We can also change a vehicle’s value at any time during the policy period. We often increase vehicle values mid-term if a car takes a sharp increase in value or is being restored or modified in a way where the value needs to be increased; all that customers need to do is give us a call. 

While that seems like a great system, we have also had to integrate a coverage that we call the 150% valuation clause. This coverage is exclusively available through our MVP program and affords up to 150% of the coverage amount listed on the policy should a claim occur. We built this coverage into the policy to ensure that owners with special cars can always replace their vehicle even if the cost is greater than the agreed value on the policy.

STEVEN POSNER, CEO, Putnam Leasing

There are certain insurance companies that will give you the agreed value of your car and a bump depending on where the replacement market is at the time of a loss. In a market that fluctuates pretty regularly, I’ve always found that it’s best to get a policy with those fluctuations built in. 

For example, I had a Porsche that I leased a couple of years ago, with a value of $90,000. One day in 2020, I took the car out and ended up totaling it. Thankfully, with the kind of policy I had at the time, the insurance company automatically gave me an increase of whatever fair market value was at the time of the loss, up to an additional 50%. 

I would say to any interested car collector or enthusiast, go to a reputable insurance company or agent that specializes in insurance for exotic or collector-type vehicles. Having more insurance is always better than less in my experience, and it’s much better to be protected than to be caught off guard in case something happens. Total losses are only one aspect of insuring these types of vehicles. If one of these vehicles is involved in a collision, owners not only have the cost to repair, but in most cases a loss of resale value, commonly known as diminished value. There are only a few insurance companies offering this coverage, and I would check with your company or agent if this coverage is included in your policy. I always insure for a little more, because you never know how much money you’re going to put into a car. If something were to happen to your vehicle, collectors want to at least be made semi-whole for the amount of time and money that was put into the vehicle.