How It Works: Insurance

With expertise from an insurance industry veteran: Jeff Broadus

The task of insuring a special-interest vehicle can be a little daunting.  Is this insurance like my regular car insurance?  What kind of coverage does it offer?  What is ‘agreed value’ coverage?  Do I insure the car the minute I buy it?  It can get overwhelming, but honestly, it doesn’t have to be and really isn’t.

To clear up some of the questions, we tapped on the expertise of Jeff Broadus, an insurance industry veteran with a multitude of years to his credit working in the industry. 

What is agreed value?

Jeff: “Agreed value is fairly simple, it’s the value you and the insurance company agree on that your car is worth. There can be variables, like the provenance of the specific car, which can provide for a higher agreed value, but in general, the values are arrived at by comparing sales of similar vehicles. You’ll see that market trends generally dictate the values.”

The provenance variable revolves around the car’s history in the community.  For example, the Chevrolet Corvette community is famous for their special awards recognizing particularly special Corvettes – the National Corvette Restorers Society, or NCRS, provides the Top Flight award, which recognizes Corvettes that have been restored to the highest level in accordance with NCRS guidelines.  An entire judging process has been developed to discern the best of the best restored Corvettes.  Bloomington Gold offers various awards and certifications for Corvettes such as Gold Certified for a Covette that appears as it did right after the factory let it go; the Survivor Award, which recognizes Corvettes that are “worn in, but not worn out,” a Corvette that is mostly unrestored, unrepaired, and unmodified among other standards.  Having a Corvette with any of these awards would help raise its agreed value.  Similarly, a senior classic car such as a Packard might have received an award from the Antique Automobile Club of America, the AACA, or Classic Car Club of America, the CCCA, which recognizes it for certain special pedigree, thus raising its value.

Jeff: “When experts judge and agree that a vehicle is spectacular in certain regards, it will help raise its overall value, and thus also its agreed value. These are cars that have been documented by experts in the field as having real value.”

So, in a nutshell, if you’ve got a car that has been somehow noted by the community as exceptional, it’s a good idea to bring this up to your agent.

When restoring your car, Jeff advises to be careful of what you spend.

Jeff: “You could spend $300,000 restoring a 1965 Mustang coupe, and it may well be the best in the world, but it’s not likely really worth $300,000. So, in reality, the insurance company won’t insure it for that amount. In the event that it gains recognition and awards and certifications from the Ford and Mustang and classic car communities, it will likely be worth insuring for several thousand dollars more than any other restored 1965 Mustang coupe, but that’ll be it, and there is a very strong chance the car will have mileage and other driving restrictions included in the policy.”

In the event that you buy a car, Jeff says that whatever you paid for it will likely be the insured amount.

Jeff: “If you bought a 1965 Mustang coupe for $25,000, chances are good that will be the agreed amount. Now, if you got a deal, maybe it’s really worth about $25,000 but you paid, say, $10,000 – you can likely convince the company of its real value by showing it to them, or showing pictures of it, whatever evidence they might want to see, and comparing it with like cars on the market. They’ll likely recognize it and accept it.”

How does agreed value work?

Jeff: “When the client and the company agree that a car is worth “X” as it sits right now, in the garage, that is the value that will be paid out in the event of a total loss. Of course, there are usually special circumstances in all cases of agreed value, and the client needs to know about them and understand them. For example, it might be written in the policy that the specific car cannot sit unattended outside of its garage overnight except for when it’s at a show or participating in a Caravan. If it’s stored outside and a tree falls on it, it’s very possible this will void the policy, and the owner will receive no money for the loss. It’s very important to understand the specifics of your policy.”

With that in mind, Jeff advises all customers of classic car insurance to call their agent, or the company that insures their car, and have a talk to understand what’s exactly in the policy and does it support their driving intentions.

Jeff: “It’s a great idea to talk with your agent to get some clarity on your policy.  It’s always a good idea to think up some questions to ask them too, like ‘tell me about my agreed value and how it works,’ or ‘what are the use restrictions based on my policy.’  Sometimes these can lead into more in depth discussions about what’s covered and what’s not covered by individual policies.”

Normally too, Jeff says, agreed value is agreed value.  If the car is worth $50,000, that will be the payout, pending no special circumstances arise (like not storing it in a locked garage and a tree falls and demolishes the car). Bottom line, drive and store your collector car vehicle within the rules and terms of the written policy.

Jeff: “Ask a million questions, they’re there to help, they want your business, but there is a bit of a reciprocation too, customers need to be responsible customers. To insurance companies, normally, classic car owners are a good risk. They take care of their cars, they enjoy their cars, they want to protect them and they will normally follow the rules. If you’re not going to follow the rules because you can’t – you don’t have a garage, for example, talk to them about it.  Maybe for a bit more money, or a lower agreed value, the company will still offer coverage.  If you like to take the family to lunch on weekends, and the car will sit in a parking lot unattended, tell them – again, they will respond with they can’t help you or they have a way to accommodate the special needs.”

Another consideration is if you plan to drive the car to work. Some policies don’t have a provision to occasionally drive your car to work.  If this is a consideration in choosing your insurance provider, make sure you’re covered.

Do I need insurance when I buy a classic car?

Jeff: “If I sell a car, the minute the money is deposited in my account, my responsibility ends.  So, while insuring the car is important, and we’ll get to that, what’s most important is making sure someone is there to take possession on your behalf.  That could be you, or a friend in the area, or even your transportation professional who will immediately load the vehicle onto the truck.”

According to Jeff, acquiring possession of the vehicle is more important at this juncture than making sure it’s insured. However, he offers more details for consideration on this.

Jeff: “Your regular car insurance will cover the classic car for up to 14 days after the money has been received by the seller.  So really, it’s a bit of a secondary point.  But – it is never a bad idea to talk to an agent and see what they can do to help.  Because while, yes, the insurance you carry on your daily driver will cover your new classic in the event of a mishap, the fact is, they will not see it the way classic car insurance sees it.  You might pay $50,000 for the car, but if the insurance company feels it’s only worth $15,000 – that’s what they’ll pay.  Classic car insurance won’t look at the car that way.”

In the event you’ve already got a classic car policy on another classic car, Jeff says it’s smart to call your agent and get the new car included, or at the very least, let them know what you’re buying, what you paid, and all the details.

Jeff: “Even if you don’t let them know, there’s a strong possibility your existing classic car insurance will cover the loss of the new car, but they have a limit of $50,000.  So, if you’ve bought a car for more than $50,000, you will likely lose the difference in the event of a catastrophic loss.”

How long do I need to keep insurance if I’m selling a classic car?

Jeff: “Once the money hits your account, your car is sold.  You are no longer liable for that car.  We’ve had a multitude of clients who sell their car and keep paying for the insurance.  The fact is, they simply forgot to remove the car from their insurance.  But, should the new owner get into a wreck, you, the previous owner, are not liable for anything, and neither is your insurance.”

Do I need to insure my car during transport?

Transportation is an exciting time in buying a car – it’s like waiting for Santa to arrive.  But, should you insure the car for the ride?

Jeff: “Again, you’ve got 14 days to get the car its own policy, so depending on how long the trip is going to take, you might have some grace period on your side.  But, it’s not a bad idea to get it insured, and it’s a good idea to just talk to an agent.”

Transportation companies normally carry a million-dollar policy on their trucks to cover the cargo.  In the event your car is among very expensive cars in transit, you might be at a loss if the cars are destroyed in transit.

Jeff: “If your car is on board a trailer with a couple of Bugattis and a Duesenberg and an important Ferrari or two, you might be in trouble.  If that truck rolls and the cars are destroyed, the million-dollar standard policy will be burned up very quickly and you’re not likely going to receive what the car is actually worth.  Normally, each car owner will get a percentage of the car’s actual worth from the payout, but in the event of an expensive load like that, everyone is going to get short changed to a degree.  But, if you have your own coverage, you will be fine.  Again, establish this with your agent.”

How much does collector car insurance cost?

Normally speaking, Jeff says the average cost to insure a collector car valued at 25K is about $300 per year. Of course, a lot of factors play into what each person pays for their car, but on average, expect to pay about $300 per year.

Jeff: “It’s truly the best way to cover your special interest vehicle. Because while you might think you’re getting a deal having your normal insurance cover the car, the fact is, they normally won’t pay out on agreed values, they won’t recognize the potential appreciation of a classic, they really normally only see an old car which has depreciated greatly in the eyes of the Blue Book. Collector car insurance studies the market trends on classic cars, they know what these cars are selling for, they recognize and account for special awards like an AACA or Bloomington Gold certificate. Of course, there are limitations, but again, if you can’t live with some of them, talk to your agent, see if there is another solution that’s better for you.”

Which collector car insurance company is the best?

Every company has their own specialties.  For example, Jeff says that Grundy Insurance realized great successes in writing collector car policies then expanded into covering hot rods and customs.  They found a niche that was underserved and difficult to insure, so they created policies that would cater to that community.

Jeff: “Think about it, hot rodders normally drive the daylights out of their cars, so insuring them was often a challenge.  Grundy was able to figure out a way to serve them.”

Fun fact: Grundy is also the inventor of the agreed value policy.

Jeff: “So really, the best thing to do is make a list of how you want to use your collector car.  Do you want to drive it to work once in a while?  Do you want to take it to restaurants and other places where it might sit unattended?  Are you into road rallies?  Is your car a vintage race car, or a performance car that you’d like to take on a track or to other competition events?  All of these can be taken into consideration, and where one company might not offer everything you want, another one might.  So come up with your list and call a few agents that represent different companies, and see what they can offer you.”