Once you’ve purchased and transported your classic car home, the next crucial step is insurance. Ideally, you have insured the vehicle before the actual transfer of the vehicle. Many collectors make the mistake of lumping their classic under a standard auto policy, only to find that their insurer won’t fully cover a potential loss. Classic cars appreciate (or at least hold steady) in value differently than daily drivers, so be sure to align your coverage with your vehicle’s true worth.
1. Understanding Classic Car Insurance Types
Insurance for collectible vehicles generally comes in three main forms:
- ACV (Actual Cash Value) – Primarily for newer vehicles that are depreciating, and not suitable for most classic cars.
- Stated Value Policy – You and the insurer “state” a value, but depreciation may still apply, and there can be deductibles.
- Agreed Value Policy – Insurer and owner agree on a specific, non-depreciating value for the car; this typically involves fewer or no deductibles but can come with usage and age restrictions. Hot rods and customs often are Agreed Value policies
The key point: Collector cars should never be insured under a standard ACV policy. Classic car specialist insurers recognize upgrades, restorations, and rarity, factors that standard insurers rarely account for fully.
2. Actual Cash Value (ACV) Policies
In an ACV policy, the insurance payout is based on a “blue book” estimate or equivalent. Since older cars often have very low retail valuations compared to their collectible worth, ACV coverage could leave you with a fraction of your investment in the event of a total loss. If you own a collector car, avoid ACV whenever possible.
3. Stated Value Policies
A Stated Value policy allows you to pick an insured amount, which the insurer usually accepts, though they may still factor in depreciation and deductibles. Some owners prefer these policies if they plan to drive their classic more frequently, because Agreed Value policies sometimes come with stricter mileage or usage limitations. However, you’ll need to reevaluate and update your stated value regularly to avoid an underinsured scenario if your car’s market value changes.
4. Agreed Value Policies
Most classic car owners favor an Agreed Value policy. In this arrangement, you and the insurer agree on a specific value for the car, which won’t depreciate over time. Typically, these policies:
- Provide Mileage Limits: Often around 2,500 miles per year, though some insurers offer 5,000 miles or more for a higher premium.
- Require a Clean Driving Record: Commonly, you need to be at least 25–30 years old with minimal moving violations.
- Mandate a Separate Daily Driver: Proves the classic car isn’t your primary mode of transportation.
- May Demand Secure Storage: High value classics often need to be garaged or kept in facilities with alarms or sprinkler systems.
While these policies can have certain conditions, the added peace of mind hat knowing the full, agreed-upon value is covered, usually justifies any restrictions.
5. Proving Value to Your Insurer
Whether you choose Stated or Agreed Value, the insurance company may require documentation to confirm your vehicle’s value, especially if it’s heavily modified or a rare model. This can include:
- Receipts: Parts, restoration work, and labor costs.
- Appraisal Reports: Particularly for high-value or custom builds.
- Historical Records: Photos showing the before-and-after of restorations or modifications.
Providing thorough evidence helps ensure you get the coverage amount you want, especially for cars that can’t be easily appraised with a standard pricing guide (e.g., hot rods, one-off custom builds).
6. Why Proper Insurance Matters
Insuring your classic car correctly protects not just your wallet, but your passion. If something unforeseen happens, be it theft, fire, or an accident, you want to be certain you can recover enough to repair or replace your collector vehicle. Using a standard policy risks a payout that barely covers a fraction of your investment, leaving you in financial trouble and without the classic you cherished.
Chapter 11 Conclusion
Securing the right insurance is the final safeguard in your classic car buying journey. As values fluctuate and rare components become pricier, an Agreed Value or Stated Value policy can protect both you and your beloved vehicle from unforeseen calamities. In the event of a total loss, the last thing you want is to argue with an insurer who only recognizes a “blue book” figure on a prized collector car worth far more.
Chapter 10 - Delivering a Classic Car