Collector Car Insurance

I’m a member of several vintage car forums and one of the topics that comes up time and again is insurance.  It's always a problem for someone!  Hagerty, Taylor, State Farm . . . each company has its promoters and detractors.  When there are complaints, many center on cancellations or rate increases.

I’m not defending or attacking any company, but I’d like to offer these thoughts:

First, we buy insurance from collector car carriers primarily because it’s cheaper, and also because we can then insure our cars for their true value as opposed to some arbitrarily determined book value.  In most states, an antique policy is a lot less money even as it provides potentially superior benefits. Where I am – in Massachusetts – a collector policy for a $75,000 vintage Rolls might cost $500 a year, where regular insurance on the same car could be $2,500.

The rates are lower because the risk of damage is presumed lower than that for a car that’s driven daily.  It should not come as a surprise that the companies monitor claims activity closely, and cancel or raise rates if an insured does not fit the low usage/low risk profile.  That could happen because of multiple small claims, miles driven being higher than expected, or a number of other factors.

You might say that buying collector car insurance at low rates is a privilege, not a right.  We may be excluded from that market by our actions, which may include tickets, poor credit history, excessive losses, convictions for fraud, or other factors.  If we are excluded by one company, we may be accepted by another. If no collector company will take us, we must buy insurance in the regular market, at market rates.

Another way to look at it is this: If we want to get the savings (and often increased potential benefits) of a collector policy, we must strive to fit the model of "low risk insured" that those companies court. With the proliferation of Big Data and the Internet, we have to do an every better job to fit this profile.

We should recognize that all insurers share information on claims made, claims paid, and also our pattern of payment and credit history.  For those who object to credit history being a determinant of insurability I’d refer you to the economists at Fair Isaac who have written some interesting papers describing how complex patterns in demographic and credit data predict insurance losses.  Whether you believe that or not – the insurers believe it, and act accordingly.  So it’s good to be aware.

The next reason we choose collector car insurance is that they generally pay for repairs at restoration shops, not state licensed body shops, often at rates well above those set by state insurance commissioners for regular insurance auto repair.  It’s a surprise to many that the state is involved in labor rate setting, but they are.  Those rates work for a fender bender on a two year old Ford but they won't cover the kind of craft workers you need for the same mishap on a '34 Packard.

From our owner/enthusiast's perspective, those are the things we want to protect our collector cars.  We want a lesser insurance cost, because we don’t drive our vintage cars much.  If we have several, we can only run one at a time.  And we want the ability to have it fixed right, if there is a mishap.

From the insurer’s perspective, there is a lot of risk in these policies for a small amount of premium money.  A typical collector policy might have a $500 per year premium with the potential for $50,000 in vehicle loss potential, and $200-500,000 in liability potential if there is a crash.  So their payout could be huge in relation to the premium.  With that reality you can’t blame them for using the latest data analysis tools to reduce their exposure. 

Another important consideration is that most collector policies are for what is called AGREED VALUE.  That term means just what it says.  If you wreck your car, and the agreed value is $50,000, the insurance will pay you $50,000 or the cost of repairs, whichever is less.  AGREED VALUE pays the contracted sum in the event of a total loss.

Ordinary car insurance assumes you are driving a car that declines in value every year, and they call those policies ACTUAL CASH VALUE.  You may have paid $60,000 for your new Cadillac, and if you wreck it the day you buy it, that's what you'll receive.  But total it when it’s six years old and the ACV may be $11,000. That’s all you will get for it. 

Collector cars do not tend to lose value like that; hence the different type of policy.  Some collector companies offer variations of agreed value; they may increase the coverage 5% per year, or offer other provisions to accommodate changes in markets.  They may also have provisions to exceed an agreed value payment as a result of unforeseen complications once a repair has been started.

That leads me to a final area where I often read horror stories, and it concerns repairs gone wrong.  What happens when you have an accident, the insurer pays the shop to fix the car, and the repair is not acceptable?

Many times I see the owners blame the insurers, while the insurers say its not their responsibility to “do something better” or “do something again.”  They lay the responsibility on the body shop. When repairs are not up to an owner’s expectation it’s sometimes not clear who is responsible.  Did the repair shop do substandard work?  Or did the insurance company’s representative decline to cover certain repairs, or insist on a certain process which did not work out?  There’s no one answer to situations like this; I just suggest you consider all sides of the story.  Remember, as the vehicle owner, it’s your job to choose a repair shop that’s capable of doing what you need.  It’s your insurer’s job to negotiate with them and pay for the work on your behalf, but they do not assure the quality of the finished job.  That is up to you.

I hope this essay has give you some insights into the world of collector car insurance.  I have a related story on insurance here that explains the different kinds of policies.  

One final word . . .  I don't sell insurance, but I do run a company that works on classic vehicles, and we've been paid by all the companies to do jobs over the years.  In my experience, all the specialty insurers have treated us and their insureds well, and paid what we asked in a fair and timely manner.  We've certainly had issues over the years but they all worked out in the end.  I think you can be well served by any of the big names.

John Elder Robison is the general manager of J E Robison Service Company, independent restoration and repair specialists in Springfield, Massachusetts.  John is a longtime technical consultant to the Rolls Royce Owner's Club and other car clubs, and he’s owned and restored many of these fine vehicles.  Find him online at www.robisonservice.com or in the real world at 413-785-1665

How to Buy Collector Car Insurance

What should you look for, when buying insurance for a collector car? Insurance is a complex thing; something many enthusiasts don’t come to understand until it’s too late – when they are unhappy or furious over their treatment when a claim is filed.

In my work managing insurance claims in a repair shop I see a few common problem areas. Figure these things out with your agent BEFORE buying a policy, and you will head off 99% of the worst potential problems.  The first is total loss value.  That’s what an insurance company will pay you if your car is wrecked beyond repair, burnt to a crisp, stolen or lost in the ocean.  It’s determined three ways, and it’s VITAL you understand which you have.

AGREED VALUE – this kind of coverage pays the value you agree upon.  Your premiums are typically xx dollars per thousand, so a $100,000 policy will cost twice what a $50,000 policy costs.  If you buy $50,000 of coverage, and your car becomes a total loss, that is what you will get.  If your car is damaged but not a total loss, they will repair it up to this limit.  Once repaired, your car will be covered by the agreed value limit once again. This is the only kind of coverage you want for most collector cars.

STATED VALUE – this sounds like agreed value, but it’s not.  Stated value will pay you the stated value, or the actual cash value, whichever is less.  Let’s say you buy $50,000 of stated value coverage, and you total the car.  The insurance company finds six similar cars offered for sale at prices ranging from $28-32,000.  Stated value coverage allows them to offer you $30,000 because that’s the average actual value as shown in the market.  The $50,000 you thought you had, isn’t.

Stated value is for all practical purposes the same as actual cash value, but they charge more for it. Stated value coverage benefits the insurance company, but it does not benefit the car collector.  I suggest you avoid this coverage.

ACTUAL CASH VALUE – this is the coverage most ordinary cars carry.  The insurance company sets the rate based on the average value of your car, and if the car becomes a total loss they pay the actual cash value at that time.  On a new Mercedes they might pay $80,000 (almost what it cost new) where the same car might fetch a $40,000 settlement a few years later as it had depreciated.  This coverage is usually fair and reasonable for modern cars, where replacements are easy to get and values are consistent.  It’s not very good for collector cars where value is often in the eye of the beholder.  Expect this coverage on your daily driver, but avoid it for your collector cars.

The next problem area is claims handling.  All policies spell these terms out, but few enthusiasts read the fine print.  Here are a few questions to ask:

What constitutes a total loss, and what about “loss of collector value?”  In many states the legislature of insurance commissioner has defined what constitutes a total loss.  In many states a total loss is a loss where the initial damage appraisal equals roughly 70% of the vehicle’s total loss value.  Depending on where you live, your insurer may or may not have control over this figure.  It’s good to know. 

In my state, as an example, a $100,000 car that suffers $60,000 damage will be fixed (not totaled), because that’s the law.  You may think it’s terrible and you may think your car’s collector value has been compromised, but in most cases there is nothing you can do.  So be aware.

Does your policy allow repair with new, original equipment parts?  Or does the policy say the first choice is used or aftermarket pieces?  Most people prefer the former; most policies provide the latter as the default.  Coverage may differ for glass and other parts in some states.  Deductibles can vary too.

Does your policy allow you to have anyone fix your car?  In some states your freedom of choice among licensed repair shops is a matter of law.  In other states shops are on some insurer’s approved lists but not others.  If you want the best shop in town fixing your baby, make sure the policy allows you to make that choice.

Does your policy pay prevailing rates for repair, or do they set an arbitrary limit?  Some places have a state-approved “standard rate” for auto body labor, which may work fine for repair of ordinary cars but prove unworkable for collector vehicles that require special skills.  If your car ends up at a shop that charges $69 per hour, and your insurer pays $38 an hour, you will probably have a problem. 

When dealing with collector cars you should ask if the comprehensive coverage includes rodent damage.  If mice eat your wiring or your upholstery will your policy cover that?  Rodent damage to upholstery can be extensive, especially on a collector car where new materials might have to be made to order at considerable cost.

Does your policy allow betterment, and if so, when and how much?  Betterment is the term for the part of a loss you (the insured) are responsible for because the repaired car ends up “better than before the loss.”  Here’s an example:  Let’s say you have an all wheel drive car that gets into a crash and the two tires on the right are damaged. The tires are half worn. Your insurance company say they are charging you 50% betterment because the tires were worn, and they have to fit new tires to fix the car.  Your tire dealer says you need to replace all four tires because you have an all wheel drive car, but the insurance company says they are only responsible for what’s damaged.

That is a normal thing in most places and with most policies.  Betterment may be set by the insurance commissioner in your state or it may be something you can choose in a policy.  Know what it may be, before you have to pay it.

If you understand the points above, and make good choices, you should end up with good coverage that you understand.  What about problems during the claims process?  Sadly, claims troubles are all too common, but they do not have to be.  At my company we’ve handled millions of dollars in claims and major problems are really rare.  But there are shops where every claim ends up as a fight.  What makes the difference?

That will be the subject of my next installment, so stay tuned

 John Elder Robison is the general manager of J E Robison Service Company, independent restoration and repair specialists in Springfield, Massachusetts.  John is a longtime technical consultant to the Rolls Royce Owner's Club and other car clubs, and he’s owned and restored many of these fine vehicles.  Find him online at www.robisonservice.com or in the real world at 413-785-1665