How to Insure Classic Cars
Denty Camry, not Dinty Moore.
How Normal Car Insurance Works
Insuring a classic car is not as simple as insuring a new car. Part of it is simply that insurance companies automatically depreciate vehicles. You drive your new Toyota off the lot, it’s value decreases. The longer you own it, the less it’s worth. At some point you reach a point of diminishing returns when it comes to full coverage: it begins to cost more to insure than the car is worth. At this point you either drop to liability or go buy another car.
Are you covered?
How does the Value of a Classic Car Change?
With classics the values work a bit differently. While the value of a collectible car may trend down over a short period of time, they increase with value over the long haul. Why? Every day that goes by sees fewer classics around. Every year sees a few more miles added to the odometer. Unfortunately, there are a certain number that meet their unhappy ends and are totally irreparable. And then there are a number that will be butchered to become some sort of weird custom. Shoot, that may be your cup of tea and that’s what you’re looking to insure.
Customs need Custom Insurance
Who Insures Classic Cars?
Now there’s another catch: how much do you drive your classic? If you only go to parades, car shows, or museums, you can get some pretty inexpensive insurance from specialty insurers such as Hagerty Classic Insurance, CHROME Specialty Car Insurance, or Grundy World Wide Insurance. When I got quotes for my 1964 Impala SS a few years ago, the yearly premiums were so low we couldn’t believe the price was correct. It was, but there was a catch.
The catch was this: it didn’t cover you if you used the vehicle as an everyday driver. While I was driving few miles a year in the car at the time (under 5,000), the mere fact that I drove it to work meant that I couldn’t get coverage. So, what did I do?
Street Rod, Hot Rod, Whatever
Regular Insurance Companies Cover Classics, Too.
I called my insurance agent. No, truth be told, my wife called our insurance agent and told her what we wanted: we wanted to insure the car as an everyday driver with a named value. I actually learned this from the insurance agent my Dad used to use.
My old agent bought her daughter a Nova that had been restored. At the time, they probably paid $8,000 or so for the car. It was quite a while ago. Anyway, her daughter gets hit, the Nova gets totaled, and the insurance pays $1,000. That’s the value they came up with based on the car’s year, make, and model.
My agent went, “Hold on a second here, this car’s been restored. We paid way more than $1,000 for it.” The insurance company—the company she worked for—said, “Ok, prove it.” Luckily she had bought the car from a used car dealer and still had all of her paperwork. She was able to prove what she’d paid for the car and was paid for that amount.
The moral of the story is she learned a lesson that most insurance agents don’t learn first-hand: you have to be able to prove what your vehicle is worth. To be safe, you insure the vehicle for that amount. How do you determine the value? At first, what you paid for it is a good starting point. But what if you bought a husk and rebuilt it from the ground up?
Does your insurer know the difference?
Keep a Recent Appraisal on File.
In that case—well, in every case—you need to get the car appraised. You can’t just wander into some shop and say, “I need an appraisal.” You have to do a little homework and find someone who appraises classic vehicles for insurance purposes. What we’ve discovered is that you can go to them, they can come to you, or you can do it yourself. In the do it yourself scenario, you take a whole bunch of specific, high resolution images (the appraiser will give you a list of pictures that they’ll need), and the appraiser does the rest on their end.
Once insured and appraised, remember that you need to get your car re-appraised periodically. Did you get it repainted? Redo the interior? Rebuild the front-end? All of these things will add to the value. You have to be sure that you keep documentation of all of these changes between appraisals and to update your insurance.