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Finally Bought Your Dream Car? Make Sure You Insurance Properly

After years of saving and dreaming you were finally able to buy that classic or exotic car you have always wanted. Whether it is a 66 Mustang or a classic Jaguar, buying a collector car is a big milestone. Now that you finally own the car of your dreams you need to make sure that you protect your investment. Classic car insurance is a bit different than normal coverage so it is important to understand the differences in policy types and what you should look for in coverage. Here is a quick overview of classic car insurance:

What Makes a Car a Classic?

While the definition of a classic car varies depending on who you ask, the Classic Car Club of America defines it as a car between 20 and 40 years old. Cars that are over 45 years old are referred to as Antique Cars. Exotic cars are a bit more specialized, they tend to be hand built, small batch vehicles that are very expensive. The majority of them are sports cars.

The market for classic and exotic cars is much larger than most people would think. AutoTraderClassics.com puts the number of classic car collectors at 6 million and the number of people that are classic car enthusiasts at over 25 million.

Classic Car Owners Needs are Different

Classic cars are in a special category all their own and collectors have special coverage needs. These cars normally spend most of their time in a garage, under a tarp and not out on the road. They are mainly used for weekend pleasure drives, car shows and other special events so the risk of an accident is much lower than a daily driver.

Classic cars often appreciate in value while a normal car will shed 15 percent of its value the moment you drive it off the dealer’s lot. A car that appreciates in value needs to be protected by policy that pays out a specified value instead of a current market value as it is often hard to put an exact market value on a classic or exotic car.

Classic Car Insurers

While it is possible to get a classic car policy from a mainstream insurance company, the majority of collectors use a specialty insurer. Mainstream insurers will usually insure cars only up to a certain value, often topping out around $150,000, putting many exotic cars are out of their league. The specialty market is dominated by a couple of large companies but there are numerous classic car insurers out there.

Classic car owners usually have an emotional attachment to their car.  After investing thousands of dollars and tons of hours they want to make sure they are fully compensated for the true value of the vehicle if an accident would happen or the car is stolen which is why most owners go with a agreed value policy.

Agreed vs. Actual Value

When a daily driver is insured by a mainstream insurer and an accident happens the owner is paid the actual market value of the car when it was damaged. Actual cash value takes into account depreciation and is determined by an adjuster. This value can often be less than what the owner actually owes on the vehicle, especially if it is a fairly new car. 

Agreed value policies on the other hand pay out an agreed upon amount. The owner and insurer will agree upon a value of the vehicle which is the amount the premiums are calculated on. This “agreed upon” amount will be paid in full if the car is destroyed or stolen.

Agreed value policies often have restrictions. The majority of them limit the number of miles that can be put on the car, often around 2500 per year, although you can pay for additional miles. Classic car insurers normally require that there be a daily driver car for every licensed driver in the household and if you have teen drivers most likely you will have to sign a driver exclusion form. Drivers have to be at least 26 years old to be on the policy and the car must be garaged at all times.

Insuring a classic or exotic car is not difficult but there are differences between classic and normal policies so make sure you research all of your options and fully understand the coverage.