Owning a classic car is different than owning a primary vehicle. Most classic car owners have invested a great deal of time and money in their vehicles. After all, classic cars are more than a form of transportation; they are an investment. Therefore, your classic car auto insurance policy must also be different than your primary auto insurance coverage.
To ensure that you are fully protected, it is essential to understand the three major types of coverage.
Actual Cash Value Coverage
Most auto insurance policies insure the vehicle for the actual cash value of the vehicle. This means that in the event of a total loss, the insurance policy will pay what the vehicle was worth in the moments before the accident. Following your accident, an adjuster will assess the vehicle to establish this value. This is the most common type of policy for modern vehicles.
However, one of the major differences between a classic car and a modern vehicle is that collector cars do not depreciate in the same way. In many cases, collector cars increase in value as the years pass. As a classic car owner, it can be unnerving leaving the valuation of your investment to the discretion of the adjuster.
Agreed Value Coverage
Agreed value coverage is often the best option for classic car insurance policies, as the vehicle owner and the insurance company agree upon the worth of the vehicle when the policy is created. The insurance company will inspect the vehicle and review supporting documentation, such as invoices or receipts, in order to establish its worth. The policy will then be written with a guaranteed value.
Therefore, if the vehicle is considered a total loss after an accident, there is no question as to its value.
Stated Value Coverage
A stated value policy is built around the value claimed by the owner at the time the policy is written, often without requiring any supporting documentation. The premiums are based upon this value, meaning a higher stated value results in a higher premium and vice versa.
While it sounds rather straight forward, this type of policy can be dangerous if it is not fully understood. Since no inspection or documentation is required by the owner to establish value at the time he or she purchased the policy, a stated value policy will pay out either the stated value or the actual cash value, whichever is less. This type of policy does not guarantee coverage for the amount the owner claimed when the policy was written.
There are times when this type of coverage is appropriate. For example, if you were to inherit your uncle’s 1935 Mercedes that was valued at $1.5 million, you may not be able to afford the insurance premium for agreed value coverage. Perhaps you could only afford a premium for $500,000 worth of coverage. Understanding that you would be at a one million dollar loss in the event of a serious accident, you may decide that stated value coverage is the best option for you at the moment.
Which Coverage Is Right For You?
Balancing the value of your vehicle with the cost of the premium to insure it can be complicated. At BenefitSource, we specialize in evaluating your needs and working within your budget to get you the coverage that is best for you. Even more importantly, we make sure you understand your policy. Call us directly at (877) 215-5431 or email us to set up an appointment to discuss the best type of coverage for your classic car collection.
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