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Guide to insuring classic cars and aftermarket parts

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Agreed-value policy explained.

Best car insurance for classic cars

The best car insurance policy for your classic car is an agreed-value policy. It costs less than a traditional policy, and equally important, it will pay out the full value of your vehicle if it's totaled.

Agreed-value policy

An agreed-value policy works like this:

  • You and your insurer agree ahead of time on the car’s full value. 
  • This “agreed value” is what you're paid if it’s totaled.

An agreed-value policy is best for:

  • Those who want to get paid out for the full value of their car.
  • Those who want to recoup restoration and major modification costs put into the car so that they can repair it.

Stated-value policy

Another type of classic car insurance is a stated-value policy, but this type of policy is not recommended. In almost all circumstances, an agreed-value policy is a better choice than a stated-value policy. That's because insurers can pay you just the actual cash value of your car if it's less than the "stated value." 

A stated-value policy works like this:

  • You decide the value of your classic car -- you’re buying as much coverage as you can afford – not insuring the true worth of the car.

  • The insurer can pay out the actual cash value of the car, if that amount is less than your "stated value.”

A stated-value policy is best for: 

  • People who acquire a vehicle without paying anywhere close to the true value for it.

Matt Robertson, managing partner of Leland West, does not recommend stated-value policies, but says they may be a good fit for those who inherit a car, so won't lose out on the value of it since they didn't spend any money on the restoration. Consider this example:  You inherit a super rare classic car from a relative, who bought it new many years ago and never drove it. It's a masterpiece that is now worth $1 million. It falls to you to insure this classic car, but the insurance for a $1 million classic masterpiece is more than you are willing to pay. The price is livable down around $300,000. So you take out a stated value policy for $300,000 on the car. After all, you won't be out of pocket $1 million if the car is stolen, but you certainly want all the protection you can afford.

In this case, even though the $300,000 is less than the actual cash value, the cost of coverage would be lower than a standard policy, says Robertson. "In uncertain times we have occasion to see consumers do whatever they can to lower their rates," he says. "The stars would have to line up right for the example to become real-world (you'd also have to find an insurance company that would deliberately not insure to proper value) but it helps illustrate a valid (and dubious) use of stated value -- and it should then be obvious how far away that is from what collectors actually want." 

How should I decide on a classic car insurance company?

Specialized policies are typically very affordable because classic cars aren’t usually driven very much compared to regular vehicles. Because coverage is relatively inexpensive -- often only a couple of hundred dollars a year -- your decision should be based on how your claim will be handled if your car is totaled, rather than price.

Typically, your insurer will ask you to provide photos of your car from different angles and of its interior. Sometimes you will also need a photo of where the car is garaged. Additionally, you may be required to have an appraisal on hand before you buy a policy. The biggest players in the specialty market -- Hagerty, Leland West and Grundy -- don't ask for appraisals, and all three offer online auto insurance quotes, as well.

 

Why can’t I just use my regular car insurance policy for my classic car?

 

You don’t want to buy the same type of policy for your beloved classic car as you do for your commuter or family car. Here’s why: If you wreck it, you will only get paid the value of the car the day before the accident. It will be valued according to its depreciated, actual cash value. That means if the market for a 1980 Ferrari shows they are worth $3,000, your insurer won’t pay $8,000 to repair it.

How much does classic car insurance cost?

A classic car insurance policy will usually cost just a third to a quarter of what you'd pay for the same coverage on a regular car. The average premium for a classic car policy for a vehicle valued in the mid-five figures is likely to be in the $200 to $400 per year range, depending on the liability requirements of the state where you live, according to Property & Casualty 360.

What if my car is not registered and being garaged long-term while being restored?

You should keep the car insured to shield you from losses due to fires or other mishaps that may happen during restoration. If you're car isn't being driven, find a classic car insurer that will eliminate the liability portion of your policy.

You should also be sure that your insurance coverage keeps pace with the increasing value of your car as it is refurbished. There are some specialty insurers that offer policies that automatically increase the car's insured value up to 10 percent every four months. 

4 tips for buying collector car insurance

  1. Opt for agreed-value: When shopping for classic car insurance, the best bet is to buy an agreed-value car insurance policy. It’s the only way you will get back your investment made to make the car like new again.
  2. Beware of fine print:  Some policies might come with very low mileage limits, such as 2,000 miles a year. If you travel to car shows or away for long weekends, that might not be enough. And check to see if there are any limits on who can drive the car.
  3. Research how claims will be handled: Be sure you know if you can use your favorite body shop for repairs, as well as if your custom parts are covered. Ask if your insurer can provide stock original replacement parts when available or if they are staffed to find those that are rare.
  4. Be sure to adjust for increased value.  Unlike regular cars, classic cars often increase in value as they age, and, as you restore it. Be sure you adjust the coverage of your policy to match the increasing value of your car over the years you own it.

How old does your car have to be for “classic” designation?

Car clubs, insurance companies and your state’s department of motor vehicles may all have different definitions for “classic” cars.

On one end of the spectrum, there is the Classic Car Club of America (CCCA), which defines classic cars as those made between 1915 and 1948. The list is very specific as to what makes of each model are given the "classic" designation. However, the definition for insurers and other car clubs is much broader.

The Department of Motor Vehicles definition for a classic car differs from state to state. Typically, a classic car is any vehicle older than 15 years while an antique is 25.

Most insurance companies consider your car is an antique or classic if it meets the following three criteria:

  • At least 15 or 20 years old or older (depending on where you live)
  • Garaged when not in use
  • Driven less than a set amount of miles, generally less than 2,500 miles per year but some insurance companies give up to 5,000 miles/year

Many insurance companies also require that you own at least one other vehicle for "regular" use. Some also won't insure drivers under age 25.

Bear in mind, however, that your beloved car doesn't have to be vintage or valuable to be covered by some classic car insurance policies. Some brand new vehicles -- and even older ones with values as low as $5,000 -- may qualify for classic car coverage under expanded criteria just issued by Progressive Advantage Classic Car Insurance, which operates in partnership with Hagerty. If a car is primarily used for pleasure driving, locked in a garage when parked and kept in good working condition it may qualify for classic car coverage under the new Progressive Advantage terms.

Aftermarket parts aren’t sufficiently covered by standard policies

Your aftermarket parts aren’t covered under all types of car insurance policies. If you have just your state minimum liability coverage, your car isn’t protected at all – you just have some coverage to pay for damage you do to other cars. If you want your car to be repaired or replaced, you must have collision and comprehensive coverages.  Some insurance companies’ comprehensive and collision coverages include a small amount for aftermarket parts, but usually just $1,000. But other insurers don’t cover aftermarket parts at all.

Best car insurance for aftermarket parts

To ensure your valuable custom parts are protected, you need what’s called custom parts and equipment (CPE) coverage. You can’t buy CPE though unless you also carry comprehensive and collision coverage. Still, the cost for CPE coverage is usually just a few dollars a month for up to $5,000 worth of protection.

If you have a very rare car or truly unique custom car that’s irreplaceable – you’ve done more than weld on a few custom parts that are pricey -- consider buying a stated-value or agreed-value policy, which will encompass your specialty parts.

Policy terms vary, however, customized equipment that generally is covered includes:

  • Any dealer-installed equipment that is not offered by the original manufacturer.
  • Special equipment such as running boards, brush bars, roll bars, undercarriage lighting, fog lights, bed liners, camper shells, trailer hitches, special roofs, etc.
  • Customized wheels – such as alloy or magnesium wheels or wheel overs, aluminum wheels or wire spoke wheels
  • Special tires – racing slicks, oversize tires or custom wide-tread tires
  • Spoilers, suspensions or performance-related equipment.
  • Stereo and sound recording equipment.
  • Television and DVD players permanently installed
  • Customized paint or decals
  • Chrome and reverse chrome
  • Aftermarket seats or leather seats not installed by car manufacturer
  • Anti-theft devices not installed by car manufacturer

Can I keep aftermarket parts on a totaled car?

If your custom car is totaled, the insurance company will pay you out for the car, and then takes ownership of the vehicle, including your aftermarket parts.

To keep specific parts of a totaled custom car, speak with your claims adjuster and find out if you can remove them from the vehicle. Depending on your insurer, you may be able to keep your parts if you agree to replace them with stock parts. Note, however, that you then are likely to have some money taken off the actual cash value you’re being paid by the insurer.

How does modifying my car affect my rates?

There’s a wide range of modifications, from ones that alter how your car performs to super-powered sound systems, so whether or not your rates are impacted depends on what you’ve done to the car.

We recommend that you first check with your car insurance company to make sure any parts you’re adding are acceptable under the terms of your policy. Your insurer will let you know if you need to get a CPE endorsement to cover them for an additional fee, as well how the parts will affect your rates or policy.

Keep in mind that some modifications will cause standard insurance companies to drop you from coverage. For example, many car insurance companies won’t insure a car if it has an altered suspension or any modification that structurally changes its performance or appearance. You may be able to find coverage with a specialized carrier, but that typically will cost you more money.

If someone hits my modified car, will his insurer replace my custom parts?

If your car’s repairs are being paid for by the other driver’s car insurance company, your modifications will likely be replaced by stock parts. But the at-fault driver’s insurer may consider replacing your custom parts if you can prove that they were covered either by your standard car insurance policy or through CPE coverage. That’s because you’ve established value for them with documentation prior to the accident.The same goes if your car is totaled. Modifications may be taken into consideration if you can show that they were covered under your own policy. You may have to show receipts to document their value.Bear in mind, however, that in many cases, custom parts don’t increase the value of your car as much as you think they do. Even if they are expensive and you appreciate how they add to the overall aesthetic of your vehicle, it doesn’t necessarily mean they add a significant amount to your car’s actual cash value.

 

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