Car Collectors: Proper Insurance on The Prized Vehicle

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Elaine Bedel established Bedel Financial in 1989 in Indianapolis. Elaine Bedel established Bedel Financial in 1989 in Indianapolis.

If you own a classic or antique automobile, are you properly insured? Your answer, or more importantly your insurance company’s answer, could be the difference between repairing your prized ride following an accident or staring at a new source of vintage parts.

No one would drive a car, or even keep it in their garage, without proper insurance. There's an important difference in the type of coverage necessary to protect your normal everyday car versus a special collector vehicle.

Typical or Special

The typical car that most people drive to work, on errands, and to destinations near and far is easily valued. If you know a vehicle’s make, model, year, option package, and mileage, you can look up the value on the Kelly Blue Book website. However, if you own a vehicle that is considered collector quality, the value may be harder to determine.

There are two classifications used by insurers when working with owners of special vehicles. Be aware that definitions may vary.

Classic Cars: Vehicles that are at least 10 years old and represent exceptional value due to limited production (example: pace car replicas), historical interest (example: previously owned by someone famous), or workmanship (example: specialty builder).

Antique Cars: Generally, this category of vehicles is at least twenty-five years old or older. However, some insurance companies may require the vehicle to be forty to fifty years old to be eligible for this category.

Typical auto insurance is perfect for a normal car that depreciates over time and can be valued based on averages. Specialty cars are more difficult to determine an appropriate price tag.  At next week’s 2016 Indianapolis Mecum Auctions (May 17 through 21), you will be able to see and even bid on an original 2005 Dodge Ram SRT/10 (#43 of 200 built), 1969 Yenko Camaro, or custom built 1933 Ford Street Rod. These vehicles are not only tough to value, they are difficult to repair and perhaps impossible to replace.

Features of Specialty Car Insurance

When insuring a specialty vehicle, you and the insurance company must mutually agree on a the vehicle's value and maximum coverage amount. This will ensure a full recovery of your value, and not just the depreciated value or standard body shop repair costs, if the vehicle gets damaged or stolen.

As with any insurance, the idea is to make you whole, not allow you to profit from a loss. But classic and antique car parts may prove hard to find, are often used, and may require reconditioning by a specialty craftsman before installation. Custom parts are by nature expensive and are usually available from only a single source. The car may even have options which if damaged cannot be replaced. All of this should be considered when appraising and insuring the car.

Differences between general auto insurance and specialty vehicle insurance include the following:

Mutual agreement on value: The car is appraised and both the owner and the insurance company agree on the appropriate value for insurance purposes.

Flexible usage: Your insurance can vary based on the intended use of the vehicle, such as display only (non-driven), limited miles, or unlimited use.

Roadside assistance: Specialty insurers tend to offer more features such as guaranteed flatbed trucks for hauling. This extends to break-downs as well as accidents.

Additional coverages: Cars under construction, tools, parts, and memorabilia can also be covered against damage or loss.

Where to Purchase

Your regular auto insurance company can cover a collector car by using various coverage restrictions (such as driver’s age, limited miles, etc.). This is often easiest. However, such companies generally have limited experience with classic or antique cars raising concerns regarding the complexity and efficiency of the claims process.

As an alternative, there are several specialty car insurers, such as Hagerty or Grundy. These companies only insure specialty cars. They understand the needs of owners and the details required for such unique coverage. They are able to provide better coverage at lower prices when compared to daily driver insurers.

Summary

So whether you own your grandfather's '55 Belair or are headed to the next classic or antique auto auction, make sure you have adequate insurance coverage. Ask questions to ensure you understand your coverage and consult a professional if you need advice. Failure to do so may cost you thousands of dollars or cause you major headaches in the future.

This article was contributed by Ryan Jeffries, CFP, Manager of Financial Planning at Bedel Financial Consulting, Inc.

Elaine E. Bedel, CFP, is CEO and president of Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. She is a featured guest each Wednesday on the WTHR (NBC, Indianapolis) Channel 13 News at Noon, "Your Money" segment. Elaine's book, "Advice You Never Asked For... But wished you had," is available on Amazon.com. For more information, visit www.BedelFinancial.com or email Elaine at ebedel@bedelfinancial.com.