Collector car insurance policies are the coverage of choice for car collectors. The premiums are very low, and you get better service and claims treatment. But while collector car insurance policies, as a class, are almost always superior to your basic consumer auto insurance policy, they are not all created equal.
Are you covered? Here’s a few examples of what to check in your policy:
Other Drivers: With one notable exception, all insurance policies cover you for anything that happens when your car is being driven by someone you have authorized to drive it — a “permissive user.” The permissive user covers friends and family — and also parking lot valets, dealer service personnel, transport drivers and anyone else who might be driving with your express or implied consent.
The notable exception is drivers younger than 25. Oddly enough, consumer auto insurance policies don’t routinely include that exception, but some collector car insurance policies do.
International Driving: To cover you in another country, your insurance carrier must be licensed to offer insurance in that country. If you’re going to travel through Europe, for example, each country you are going to visit must be considered separately.
Your typical consumer auto insurance company isn’t going to be able to handle this job. However, some collector car insurance companies can’t handle it either. Some of them can arrange coverage through a “partner” in the country you will visit. Some just don’t deal with this at all, and they leave you to obtain separate coverage altogether, which can be expensive.
Even when your collector car insurance company can help you, expect to pay an added premium. Since only a small percentage of customers drive their collector cars outside the United States each year, it doesn’t make economic sense for the insurance companies to build that coverage into everyone’s normal premiums.
Mileage Limitations: Some — but not all — collector car insurance policies limit your allowable annual mileage. The reason is obvious — the less you drive, the lower the risk of an insurance claim and the lower the premium that can be offered.
Some collector car insurance companies give you the choice, with corresponding premium differentials. If you don’t drive a car very much, then you might as well take the mileage limitation and save a few bucks.
The key question is, what happens if you exceed the mileage limitation? Say you are butting up against your annual limitation when you take your car on one of the 1,000-mile vintage rallies. If you have an incident toward the end of the rally when you are over the limitation, do you still have coverage? The answer depends upon the precise wording of your insurance policy. The penalty may just be an added premium, but it can also be denial of coverage.
Use Restrictions: All collector car policies restrict you from using the car in a business or as your daily driver, but some go much further with use restrictions. You can find policies that limit your driving to shows, club events and the like. Again, the question is whether you have coverage if you violate the use restriction.
Garaging: Some policies require that your car be stored in a secured garage when not in use. Some require that the car be stored in a secured garage every night.
Racetrack Incident: Don’t even think about it. Everybody excludes coverage for things that happen on racetracks and at competitive events. That includes autocrosses and the like, and no one accepts the “driver education” rationalization any more.
Rallies and Tours: You shouldn’t have to worry about vintage rallies and tours. They are run on public roads, and they are not competitive events. Your standard TSD rally shouldn’t cause any problems, as it is not a speed event in the sense of a race.
The main coverage questions with rallies and tours are the use restrictions and, most applicable, the garaging requirements. If your collector car policy requires garage storage every night, that won’t work with most of these events — even if they provide security when the cars are parked outdoors.
What really sets the collector car insurance companies apart from the consumer auto insurance companies are their claims-handling procedures. But, as in most things in life, they aren’t all the same.
Let’s say you have a little mishap and moderately wrinkle the front end of your collector car. Every insurance company will pay for the repair, but to what level of quality? Here are some questions to consider:
Can you select the shop you want for the repair work? If you can, will the insurance company pay their labor rates — or limit their payments to what their shop of choice would have charged? If your choice is a specialty restoration shop, will the insurance company pay for that level of work? If the closest specialty shop is two states away, who pays for transport back and forth?
Say that the repair requires that the nose, hood and fenders be repainted. But how does the end product look? You have a like-new front clip, but the rest of your car shows its mileage. Should the whole car be repainted to give it a consistent look? What about the now-mismatched chrome and rubber trim pieces?
If your car was a very original example, how much time will be allowed to repair the original parts, even if they could be replaced more cheaply? Will the insurance company agree to allow the shop to source NOS parts at higher cost, or will it insist on reproduction parts?
An experienced attorney can probably get very close to all of the answers you want to these questions. However, you’ve probably lost the battle as soon as you get that attorney involved with your claim. If the insurance company is resistant, the legal fees are going to mount up, and your end financial result will be unsatisfactory to you.
Ask lots of questions
The best course is to select a collector car insurance company that will handle your claim properly. But their marketing materials all say they will, so how can you find out ahead of time?
“Legal Files” posed this question to Paul Morrissette, President of Chubb Insurance Solutions Agency Inc. Morrissette gave an excellent presentation on collector car insurance issues as keynote speaker at the SCM Insider’s Seminar in Scottsdale in February.
Morrissette’s advice was to ask all of these questions ahead of time. Ask the carrier how they would handle each of these aspects of your potential claim. Be very specific about shop choices, parts choices, and the scope of restoration work they will pay for.
It’s not a bad idea to get it all in writing. Write a confirming letter describing everything that was discussed, and don’t forget to ask for clarifications where needed before you buy the policy. It’s too late to do that afterwards.
Morrissette described a recent incident that gives us something to think about.
The insured driver took his Porsche Speedster for a sunny-day drive with his daughter. Another driver ran a red light and T-boned the Speedster. The Porsche caught fire and was totaled. The father and daughter were seriously injured. The errant driver’s insurance policy had only the state’s minimum coverage of $20,000, which didn’t put much of a dent in the damage.
Fortunately, the Speedster owner’s collector car policy had a high uninsured motorist benefit, and the claim was fully insured.
What was interesting is that, as Morrissette explained, uninsured motorist coverage varies in one important regard from state to state. In some states, your uninsured motorist coverage under your normal family car insurance coverage will automatically cover your collector car. In other states, it doesn’t, and your collector car policy’s uninsured motorist coverage controls. Make sure your coverage is adequate.
“Legal Files” has always recommended agreed-value policies. They can be your best friend, as they eliminate arguments about value. However, especially in times like today where many collector cars are rapidly increasing in value, they can be your worst enemy. Why? You and your insurance company have set the value of the car for all policy and claims purposes.
Say you purchased an agreed-value policy on your 356 Porsche two years ago, with an appropriate agreed value of $75,000. It’s now worth $150,000, but you never got around to increasing your agreed value. This can hurt you badly in two ways:
First, if your 356 is totaled, all you get is a check for $75,000. What’s more, the insurance company now owns the wrecked car, and it can recoup much of its loss by selling it to a restorer.
Second, all insurance companies compare repair costs to some percentage of the value of the car to determine whether the car is a total loss, commonly in the 60% to 80% range.
Say your insurance company uses 75%. That means that if the repair cost of relatively modest damage exceeds $56,250, the insurance company has the right to declare it a total loss and pay you $75,000. It then owns the car, repairs it, resells it and ends up out hardly anything. You can buy the salvage from the insurance company, but that can cost as much as the low agreed value.
The solution is to keep your agreed values current. If they don’t reflect current market values, you can really get caught short. ♦
John Draneas is an attorney in Oregon. His comments are general in nature and are not intended to substitute for consultation with an attorney. He can be reached through www.draneaslaw.com.