Are You Insured? Really?
You buy insurance because you think something bad is going to happen to your car. It could be a fire. It could be an accident. It might even be that someone likes your car so much they steal it. Your insurance policy is designed to protect you against financial loss should any of this happen.
The insurance company is betting that none of the above will happen to your car. They only make money if everything goes very well with your car. They’ve created some very sophisticated mathematical models that allow them to predict the chances of something bad happening to you car. The insurance company is making a very sophisticated bet that your car is going to be just fine.
The whole principle behind the insurance industry is to sell you something you may never use. Insurance companies make money only if you never file a claim. Insurance is a very profitable business if the customers never actually use it.
Collector car insurance is so reasonable because classic car owners seldom use their cars. Collector cars normally don’t get driven a great deal. When they are driven the weather is usually perfect. More importantly the people who drive them are very careful drivers, at least when they drive their classic cars. If you just spent just spent ten years, and untold amounts of money restoring a car, you drive it very carefully. Your insurance company likes that.
Just to make sure that very few classic car owners ever actually need insurance the companies have added some rather interesting stipulations. Grundy for instance states rather clearly that you must meet the following conditions.
· Have no more than two tickets
· Have no DUI in past three years
· Have no more than one accident (at fault)
· All household drivers must have a different vehicle insured for daily use.
The exact stipulations vary from one company to another. Some will write a policy that allows you to drive your collector car to work a couple of times a week. While almost everyone has a mileage stipulation most companies will offer you a variety of millage packages. Some even allow you to roll unused miles over to the next year. Grundy Insurance is one company with no mileage limitations. Part of the reason is that Mike Grundy collects brass era cars that don’t have odometers. He gets it.
These stipulations mean that the insurance company can offer you very reasonable rates because they’re significantly reducing their exposure to a claim. You get a really low price on your policy and the insurance companies seldom have to pay out on a policy. This is good for everyone involved.
Ford Heacock, the founder of Heacock Insurance, goes on to point out that companies who insure collector cars also understand complex claims. The average insurance company wants you to sign off on the claim before too much damage is discovered. They also have favorite collision shops that they recommend. These are shops that turn out a lot of jobs for a fair price. At least fair to the insurance company.
I want a shop to take as much time as possible to investigate the damage to my 1973 911S. The shop I like is most likely a specialty shop without a lot of experience dealing with insurance companies. I need an insurance company that understands that my priority is quality and not speed. The car can be in the shop for a year if that’s what it takes to do the job correctly.
These are all points of discussion. Discussions take time. These discussions are best done with a person who understands your car. This is what Ford Heacock is talking about. You want an insurance company that understands your 1948 MG TC.
The Project Car in Your Garage
Your homeowners insurance generally doesn’t cover a car that’s not operable and is unregistered. We’re talking about that project car that’s been in your garage for the last decade. If your garage burns down your homeowners insurance won’t
cover this project. There’s a basic rule here that all insurance companies follow. “If we don’t know about it we aren’t going to insure it.”
Some of our projects can take years, or even decades. We generally don’t keep these project cars registered with the DMV. The average insurance company is very wary of insuring cars that aren’t registered. Actually most won’t insure them. This means you have to go to the specialty market. You’re actually insuring something that is in storage.
Hagerty points out very clearly that you need to be aware that a general insurance policy for home does not include coverage for your project car. If an incident occurs it’s important to have a policy specifically for your unregistered project car. You have to tell the insurance company about your project and it’s probably best that you send the pictures of the project. Push the car into the driveway and take the usual photos from all four sides. It’s best to this this very early on in the project while the car still has a suspension and four inflated tires.
The National Corvette Museum Insurance Agency (NCM Insurance) uses a stated value approach until the car is eighty per cent complete. They will work with you on determining the value of the car that’s been apart for the last few years. Once the project is eighty per cent complete you call the NCM Insurance Agency and modify your policy to Agreed Value Coverage.
You might be able to make some adjustments to your homeowner’s policy so that your E-Type project is insured but it has to be very clear. If your agent says he can do this ask for a letter from corporate that explicitly states that your unregistered E-Type is covered under your homeowners policy. The agent’s word won’t help much in the event of a fire, or even worse a theft.
What If My Car is in a Shop That Burns Down?
Don’t ever assume that the shop working on your car has insurance. Shops are broken into every day. I’ve also seen shops burn to the ground with several Ferraris in them. You need to be sure that your insurance policy covers your car when it’s in a shop.
What often happens when a shop burns down is that the insurance company adds up the total value of the cars that were destroyed and then compares that number to the amount of insurance spelled out in the shop’s insurance policy. Owners will then receive a percentage of their loss. This percentage is the same for each car that was destroyed. This means that if there was a $2,000,000 Ferrari in the shop you aren’t going to get much for your MGA. Forty-five percent of $2,000,000 is a lot different from forty-five per cent of $20,000. It’s best that you carry your own policy when your car is in a restoration shop.
What’s an STP Policy?
Some of you can actually register your racecar with the state. For many of us that’s just not possible. Imagine showing up at the local DMV office with your Lola F5000. That means you need something Heacock Classic and other companies call their STP policy. STP means your car is insured while in Storage, in Transit or in the Paddock.
When your car is covered by an STP policy it is covered everywhere except while it is on the racing surface. This includes coverage during transportation, loading/unloading, driving in the paddock and driving between the track and paddock. However, once your car enters the racing surface all STP coverage is voided. When you leave the racing surface the STP policy goes back into effect.
These STP policies are generally limited to competition cars. That means if your racecar is registered for the street it may not be eligible for coverage. These policies also generally carry a deductible of around 2 per cent of the value. Some companies put a maximum deductible of $2,000 though. The good part is that these policies are pretty reasonable.
Trailers
Your normal auto insurance generally extends to towing scenarios. Policies vary by company and also by state but in general your everyday insurance policy will cover damage done to the trailer but not the car inside. You really need to talk to the agent who carries your normal automotive policies though. This can get complex really fast.
The only way to determine if you have the proper coverage is to ask questions. This is just one more reason you need a specialty company. They understand all of this. Your local insurance agent may have never handled a claim involving a trailer. At least they haven’t had a claim what the car in the trailer was worth over $100,000.
This is really simple. It’s the value that you and your insurance company agree on. Once you and your insurance company agree on a value for your vehicle, that's what you'll get in the event of a total loss. They should not depreciate or question the vehicle's value over the time the policy is in effect.
Insurance companies have a pretty good idea about the value of your car. Hagerty even has a web site where you can look up the value of your car. One thing to consider is that you might want to update your value on an annual basis. At times the value of our cars resemble the commodities market. Make sure you review update the agreed upon value every year.
Agreed value is totally different from an actual value policy. Actual value is generally the blue book value. Your claims adjustor simply goes to the Blue Book and writes you a check for whatever value they find. You can be sure that this value may not be what you consider fair.
The next item to consider is something called Stated Value. This means your car is worth up to a specific stated value. You will never receive more than this stated value if you suffer a total loss.
Diminished Value
This is where things get really interesting. If you have a really nice car and it has an accident a lot of people will consider that car permanently damaged. It will never be original again. It can be perfect but it won’t be original. That means it’s worth less. The difference in value between a vehicle with an accident history and the same vehicle without an accident history is known as diminished value.
Diminished Value has to be due to a specific, sudden and unexpected occurrence. This is not depreciation. Diminished value can happen following an accident and can occur in one of three ways (or a combination thereof):
Repair-related diminished value
Claim-related diminished value
Inherent diminished value
Claim-related diminished value
Inherent diminished value
Insurance companies may not readily recognize or offer to pay for diminished value. Most companies will not offer diminished value on collector cars. This whole discussion gets very complicated since every state has a different opinion as to what constitutes diminished value. Just because your state allows this type of claim does not mean the insurance company has to pay you.
The very first thing the insurance company will ask for is an appraisal of the car’s value prior to the incident and a second appraisal after the repairs have been completed. If you don’t have a pre event appraisal then the discussion will generally stop right there.
One company that doesn’t require an appraisal is Grundy insurance. They feel that the agreed value has already established the value of the car. Jim Grundy feels his company’s “goal in all accidents is to make the customer “whole” after a loss. This means if it can’t be done in the body shop, at least the financial loss can be rectified with the insurance companies settlement.” Grundy Insurance offers cover Diminution of Value in both their classic car and collections programs.
On Track Insurance
There are really two very different items here. First we have High Performance Driving Events (HPDE), These are very different from racing. HPDEs are a form of driver’s education. You just drive faster than you did back in your high school driver’s education class. They’re designed to teach proper high speed driving techniques and there is no competition involved. The problem is that they’re generally held on racetracks. That scares your normal insurance carrier.
Most of the major insurance companies have changed their policies to specifically exclude coverage for any driver’s education events that take place on a racetrack. You need a policy that specifically covers your car in these events.
Lockton Affinity, the Corvette Museum and OnTrackInsurance.com write policies for on track damage that might happen during a driver’s education event. These policies cover damage once you enter the grounds of the racecourse and they end when you exit the premises. They will not cover your trip to and from the event. They are not an STP policy.
Since most of the cars involved in track days are streetcars there’s an agreed upon value. In other words the insurance company can find comparables. Remember though that these on-track insurance policies do not include liability insurance.
The National Corvette Museum has been involved with on-track insurance for some time. You can actually purchase it online (www.ncminsurance.com/hpde) and not even talk to an agent. Hayden Wood is another firm that’s been involved with on-track programs for some time. They will not though write an on-track policy as a stand-alone policy. You have to purchase what they call the Platinum Package. They will insure your car for up to one million dollars if you can qualify.
OnTrackInsurance.com is focused on track days. Just as with the NCM insurance you can sign up for insurance online and never have to talk to an agent. As with most other companies the policy is written with an agreed value. There is a deductible that is ten per cent of the agreed upon value.
Another item you have to consider is the deductible. You will generally have the option of 10, 13 and 15 per cent deductible. Again your choice will have an impact on the cost of your policy.
You need to consider is how often you file a claim. Lockton Affinity is very specific about this. They point out “Participants who have more than one claim with Lockton Motorsports in a 3-year period are not eligible for this coverage.” Basically they will only insure you if you’ve demonstrated that you’re safe on the track.
Tabetha Hammer at Hagerty points that “On-track racing coverage can be a controversial topic. Some feel there is a potential for it to impact the sport in a negative way with drivers being less cautious on the track if they have coverage.”Ford Heacock agrees with her. Ford founded SVRA and he feels that on track insurance changes the dynamics of on track behavior.
Neither Heacock nor Hagerty offer on-track coverage, but they can refer customers to agents they work with who can add this in addition to the off track program. At this point though on track insurance is just a basic fact of life. A lot of your competitors are fully insured for damage
.
It’s Complex
Insurance is incredibly complex. Each state is different. The law is very different in North Carolina than it is in Michigan. Insurance regulations are written at the state level. We don’t make it any easier when we drive all of these strange cars around. Ford Heacock was absolutely correct when he said you need an insurance agent who can deal with complexity. Collector car insurance is not something the average agent can deal with. Actually they don’t even want to deal with it.
The good part is that there are usually a half dozen insurance companies at the major car shows. Plan on spending a few hours talking to them about your specific needs. Ask for help and don’t assume that you know anything about this part of the insurance world. Very few people do. Actually the average insurance agent doesn’t. That’s why all of this is called a specialty market.
Some Sources for Insurance
American Collectors Insurance
496 Kings Highway
Cherry Hill, NJ 0802-0343
800.360.2277
www.americancollectors.com
Chizmark Larson Insurance Agency
Mike Larson, Sr. Agent
Epic Insurance
David Alvarado
35 Main St.
21st Floor
San Francisco, CA 9410
415.356.3990
www.epicbrokers.com
Grundy Insurance
P.O. Box 1957
Horsham, PA 19044
866.338.4006
www.grundy.com
Hayden Wood Insurance Agency
Morgan Duffy, President
508.229.8700
info@hwimotorsports.com
Hagerty Insurance Agency, LLC
P.O. Box 1303
Traverse City, MI.
49685
www.hagerty.com
K&K Insurance Group
P.O. Box 2338
Fort Wayne, IN 46801-2338
800.637.4757
www.kandkinsurance.com
Lockton Affinity
P.O. Box 410679
Kansas City, MO 64141-0679
866. 582.4957
locktonmotorsports.com
National Corvette Museum Insurance Agency
350 Corvette Drive
Bowling Green, KY 42101
877.678.7626
On Track Insurance.com
Jacob J Katz & Company
455 Route 304
Bardonia, NY 10954
866.638.0505
ontrackinsurance.com
ontrackinsurance.com
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