America’s infatuation with the automobile dates back more than a century when cars first started rolling off assembly lines. Today, most of us rely on our cars to serve utilitarian functions—getting to work, shuttling kids around, or picking up groceries. But there is a certain group of drivers who are still feeling the love when it comes to the automobile. For antique and collector-car enthusiasts, their cars represent far more than nuts, bolts, and wheels.
Whether they have inherited a mint-condition treasure that’s been carefully maintained and garaged or purchased the car of their dreams to drive on weekends, these prized vehicles have a way of capturing their owners’ hearts and imaginations. That emotional element means they represent a unique market for insurers and claims professionals to serve. It also presents special claims challenges due to most collectors’ strong desires to keep their vehicles and to have them painstakingly repaired when a loss occurs.
“I often tell people that our customers love their cars more than they love their spouses,” jokes Miguel Perez, claims manager at Assurant Specialty Property, carrier and claims servicer for American Collectors Insurance, a specialty firm offering insurance customized for collectors. In fact, it’s not uncommon for owners to think of their vehicles as family members.
Many collectors view their vehicles as irreplaceable. They want to go to great lengths to repair them, which leads to work that would never be considered under a standard auto policy. When a standard auto investigator dubs a damaged car as a “total loss,” a typical owner may be fine with that. A collector, on the other hand, likely will want to repair and keep the vehicle.
A large number of claims occurred during Superstorm Sandy in October 2012 when catastrophe struck many collectors on the Eastern Seaboard. Forty percent of claimants in the American Collectors-Assurant program purchased back their vehicles after suffering total losses, indicating their enthusiasm for keeping vehicles that sustained heavy damage.
Jay DiVone of Brick, N.J., has twice worked extensively on his 1969 Chevrolet Corvette. He restored it upon acquisition in 1996 and repaired it after Sandy swamped his garage with 27 inches of water. Said DiVone, who personally supervised and performed part of the restoration, “To disassemble, inspect, clean, and paint the saved parts took me around 150 hours. To put it back together and make all of the needed adjustments took me about the same time.” His collector-auto policy provided coverage not only for parts, but also for labor.
In addition to weather events, claims also arise from vandalism. For example, retired Col. Robert Morris of Virginia owns a 1970 Rolls-Royce Silver Shadow, affectionately known as “Emma.” On Valentine’s Day 1987, he was thrilled to tell his new wife that her lifelong dream of owning a Rolls-Royce had come true. Stationed in Vicenza, Italy, the newlyweds traveled to London to pick up the car. It needed a little work, but it didn’t take long for it to assume a special place in their lives.
“We enjoyed driving her around town and even brought our newborn daughter home from the hospital in it,” says Morris. “I just can’t explain how much this car meant to us.” Years later, when the vehicle was damaged in unusual circumstances, it was painful for the couple.
Morris made the fateful decision to ship the car to Florida to have specialized paint and body work done. Despite verifying the individual’s credentials through several sources, including a Rolls-Royce owners club, things went awry. He was shocked to find out that Emma had gone missing.
When authorities finally recovered the car, Morris was stunned to learn that the man he had trusted to perform a $9,000 paint job had fallen on hard times and that the car was neglected and damaged by vandalism and water. “The interior was completely trashed—upholstery destroyed, parts of seats missing. Even the beautiful wood trim that Rolls-Royce is known for had been ripped out,” he recalls. Heartsick, Morris approached his carrier about a claim for the damage. Both perils were covered under the collector policy, and together they worked through the process of getting essential repairs done.
Special Cars Require Special Policies
A key factor in covering collectibles is establishing—and insuring—the vehicle’s value. Policies often are written to what is known as “agreed value”—a predetermined amount that will be paid in the event of a total loss. Unlike traditional auto insurance, which depreciates the value of a vehicle over time, collector coverage recognizes that collector vehicles usually hold their values and even appreciate over time.
Collector-vehicle policies may include inflation features to account for appreciation. With an inflation guard feature, the agreed value appreciates according to a certain schedule—e.g., a percentage per quarter. In the event of a total loss claim, the claim value would include appreciation. Such an increase in value would be lacking in a standard auto policy, which becomes problematic if an insurance consumer is covering a collector vehicle.
Standard policies typically don’t account for the investment made in maintaining or restoring the vehicle. When Morris discussed coverage with his standard auto insurance carrier, he found that his car could be insured for nothing more than book value. Morris preferred a specialty policy that allowed him to be made whole up to the agreed value rather than the lower cash value of a standard policy.
According to NADAguides.com (which publishes market-reflective vehicle pricing for new and used cars), a 1970 Rolls-Royce Silver Shadow four-door sedan is estimated to have a low retail value of $9,300 (daily driver rate). By contrast, the collector-vehicle policy insured the vehicle for $23,000—a figure agreed upon by the insurer and policyholder prior to policy issuance.
What Makes It a Collector Vehicle?
“Any car can be collectible—such as a new, limited-edition sports car,” Perez explains. “But most of the vehicles we insure are no longer in production. Parts are going to cost more. Sometimes we can’t even find a part, so one has to be custom fabricated. Labor costs also are going to be higher because you want to find a repair shop that is familiar with the make and model and is an expert on that type of car.”
The qualification process for purchasing a policy is relatively simple as long as the car meets certain basic criteria. Typically, even weekend tinkerers can purchase collector-vehicle insurance coverage for their hidden gems if the car is:
- Any year, make, or model if the vehicle has collector value.
- In a lockable enclosed garage when not in use.
- Driven no more than a certain number of miles per year.
- Driven for hobby or pleasure, not regular transportation.
- Has an owner with at least five years of driving experience.
Under most collector-auto policies, the vehicle cannot be used as the owner’s primary form of transportation. The owner is, however, allowed to take it to public functions such as car shows and exhibitions, club activities, and parades. Some insurers will permit modified garaging arrangements such as storage on a military post.
When the Apple of Your Eye Gets Blemished
With all the love, money, and pride poured into these collector cars, it’s easy to understand how heartbreaking it can be when something goes wrong. Perils run the gamut from acts of God (hurricane, flood, lightning) to collisions, vandalism (a jealous bystander keys the car), and theft.
“During the winter, we see damage from fallen trees and garage roofs collapsing from the weight of snow and ice,” Perez says. “Sometimes there’s fire damage caused from heating elements in the homes. During spring, some vehicles are damaged by rodents that have nested in the cars through the cold winter. In the summer and fall as people are out and about in car-show season, we see more standard collisions, collisions with deer, and theft claims.”
In handling a collector-auto claim, after documenting the facts and obtaining police reports as warranted, the insurer will send an adjuster to fully assess the damages. Typically, claims adjusters arrange to meet the insured at a body shop or other repair facility. While the adjuster can go to the owner’s residence, an inspection at a repair shop may uncover internal damages that might not be apparent in a home garage.
The claims challenge is to determine if there is coverage under the policy and whether repairing or replacing the vehicle is more appropriate under the agreed-value coverage. In the example of the 1970 Rolls-Royce, there was coverage because water damage and vandalism were insured under the policy. The vehicle was not a total loss, so the insurer determined the cost of repair would be covered.
Another challenge in these types of claims is determining whether or not there is a structural total loss. For example, if a vehicle’s firewall (between the engine and the passenger compartment) is damaged, then the vehicle typically would be declared a total loss no matter what other damage was sustained.
Given the unique nature of parts and labor for a rare or out-of-production car, owners are given some flexibility in how they handle repairs. They can locate an expert repair facility on their own or even repair it themselves, if they’re so inclined. However, both types of claims are evaluated the same. The key is determining what it will take to make the policyholder whole again.
The carrier will look at local, state, and national resources to assess the standard prevailing rates and proper repair costs for the vehicle. The insurer’s experience with specialty restoration shops and parts suppliers around the country is valuable to collectors in the claims process because parts and skilled labor can’t be found in every town. That’s one reason why a number of standard auto providers use collector-vehicle specialty programs on a “private label” basis for their policyholders who are collectors.
The appraiser is responsible for arriving at an agreed-upon price with the specialty repair shop for the total cost of repairs. If the insured fixes the vehicle, the standard repair rate for that particular vehicle within the geographic area will prevail. The carrier then issues payment to the insured based on an agreed-upon price.
In more severe cases, the vehicle’s damages can exceed the policy value or the total loss threshold allowed by the state, and the vehicle must be deemed a total loss. If this happens, the insured is issued a check for the agreed-upon value. If the insured chooses to retain the damaged vehicle, a salvage company is contracted to determine salvage value for the vehicle in its current condition, and the insured is given first right to accept or deny it. If the insured accepts the salvage value, the claim is settled for the vehicle’s agreed value less the salvage value and any applicable deductible.
Of course, there are limits to coverage. Damage from street racing or other dangerous risks will not be covered. Also, the typical policy does not cover routine mechanical failures.
Another difference with collector-vehicle coverage is distinguishing between repairing and restoring a vehicle. Collector-auto policies are intended to repair damages to the car when a mishap occurs, not to restore it fully to original showroom condition. In the event of a claim, an unrelated prior damage estimate accounts for any damage the vehicle had prior to the loss. An owner in the middle of a restoration cannot use the policy opportunistically to pay for damage that has already occurred.
In Morris’ situation, it was unusual that working with a service professional would take such a sinister turn. It’s worth noting, however, that had the claim been initiated simply because of a dispute over workmanship, the policy would not have offered benefits.
Special Vehicles and Happy Endings
Morris’ story does have a happy ending. Today, Emma is almost totally back to normal, despite her harrowing experience. And the colonel was once again thrilled to present his wife with her beloved Rolls—this time parked safely in their driveway on Valentine’s Day 2014. “My wife cried after hearing what had happened to her car,” Morris says. “But then she ran out to the driveway to literally embrace Emma. It was very touching.”
With the increased popularity of classic-car collecting in recent years, insurance coverage has evolved to meet the needs of this specialized market—and there is no substitute for experience in serving these selective customers. Owners of these highly prized collector cars appreciate the peace of mind that comes from knowing that they will be made whole if something unexpected happens to their treasured vehicles.