Is Your Car Really Insured? a review of classic-car insurance
by Neil Maken — used with permission
Several months ago we received an e-mail from Bob W., a reader in Woodland Hills, CA. His e-mail began,
...After reading your article “In Pursuit of Authenticity,” I hope that you might be able to give some insight into how one should insure an antique vehicle so that it is insured for the “go everywhere” driver ... I dropped one insurance company in 1990 because when I called them and questioned them about when I was covered they gave me a very restricted range of coverage and limited allowed mileage. I have been with another company (again, company name deleted) since then because their coverage includes the phrase “maintained solely for use in exhibitions, club activities, parades or other functions of public interest and is occasionally used for other purposes,” and they do not have a mileage limitation.
Recently, I called again, proposed the following scenarios and asked if I would be covered:
(1) I take an antique vehicle to a local restaurant for dinner.
(2) I drive to a local grocery store for a loaf of bread.
(3) Living in Los Angeles, I take a trip up the coast to San Francisco, staying in motels/hotels along the way.
The answer that I received was that I would not be covered in any of the above cases.
This letter made me realize that I, too, use my antique cars for considerably more than just car shows and parades, and I wondered, “Am I covered?”
I drafted a letter outlining the scenarios presented by Bob W., and mailed the letter to twelve insurance companies, including the “big company” names so well known to us, as well as a number of smaller insurance companies whose names I found during an internet and collector-car periodical search.
The first thing that I found out was that if an inquiry doesn’t fit into a predetermined category which can be readily answered by a clerk, it is conveniently “lost” by the company. Only a handful of insurance companies responded to my first letter, which was addressed either just to the company name or to the ‘Underwriter” at the company name.
In a second batch of letters, I named the president of the company (or the chief officer) in the address (those names were located through an internet search or by telephone calls to the company). In every case the second letter - with a brief cover note explaining our objective, pointing out that we never received an acknowledgement to our first letter, and a copy of the original letter - prompted a response from either the chief underwriter or an executive of the company. I point out the difficulty in getting a response from a responsible party so that you, the reader, will understand why you have difficulty getting an accurate answer to your inquiries.
Once the second letter was received by the company president, I began to get a flurry of telephone calls. I kept names of the callers, along with their responses on file so that we could double check information if necessary without having to start from the bottom again, re-explaining everything to another clerk.
The second thing that I found out was that the initial “knee-jerk” response was often tempered by further discussion. In a couple of cases the representative back-pedaled after being directly questioned and confronted with the information that a competitor interpreted the situation differently. I realized that we’re dealing with an intangible product, and that human judgment goes into the response. There are (virtually) no hard and fast rules, and every situation is subject to the perception of the clerk reviewing it.
What it means is that you are only insured if the person reviewing your claim thinks that it is beneficial to the company, or if the claim is “black or white.” Shades of gray can be twisted and ignored. Having stated that though, it doesn’t mean that if denied, you have reached a dead-end. Often you can request, and get, a review of your case. Sometimes it takes a bit of telephoning to get the name of a responsible individual who will take the time to carefully review the facts before approving or denying. And often that person is not an employee of the insurance company from which you bought the policy, but from the company that actually accepted the policy and is doing the insuring.
Let’s take a moment and review just what insurance is and how it’s handled.
- You telephone or e-mail an insurance company whose name you found in Hemmings or some other periodical. This is known as the “Agent.”
- You either verbally or on an application give a brief synopsis of the car(s) that you own, the value that you consider each car to be worth, and the estimated number of miles that you will drive (think this one through pretty carefully - if you only drive to a local car show or local parade occasionally, you are not going to rack up many miles). You provide a history of your driving records.
- You may supply a credit card number and have the company provisionally approve your application.
- The application is reviewed by the agent company’s underwriters (or a clerk), approved and then sent on to another company that will assume the actual risk of insuring you. This second company is known as the “Carrier.” The Agent will issue a policy. The carrier’s name will appear on the policy itself, with the agent’s name as a secondary identification.
For all intents and purposes, this is the last that you will hear of or from the Carrier unless there is a claim. If you have no claim, you will merely get a renewal notice (along with applicable premium increases) from the agent. You will write the check(s) to the agent, and they will pay the actual premium to the carrier, keeping a percentage or commission for themselves as sales agents and to cover the paperwork.
In most situations the agent is authorized to review your claim, and, on small claims (such as a broken windshield), approve payment on the spot, and the carrier is notified to pay the claim. In cases of bodily injury, dispute or larger claims, questions of liability or disputes as to fault the case is turned over to the carrier company which will review all factors and determine fault, liabilities, and amount of settlements. If a damage appraisal is required, the carrier company generally has independent appraisers who will visit the vehicle and determine an estimate of repair. You are free to choose the repair facility to do the actual work. An agreement between you and the carrier company will determine whether payment is to be paid to you (and you will pay the repair shop) or whether the check is to be sent directly to the repair facility.
The accident report has to be submitted to the carrier company. They will determine fault (or percentage of fault) and will determine whether rules were broken and whether they want to continue to insure you and your cars. If they decide not to renew you, they are obligated by law to give you notice of cancellation so that you can get other insurance. Some states, but not all, require that you, the driver/insured and the insurance company report accidents involving personal injury or property damage in excess of a set amount directly to the state’s department of motor vehicles.
Okay, that’s the mechanics of it, but what of the question of are you insured under a given set of circumstances? And that brings us back to the original letter sent to us by Bob W. of Woodland Hills, CA.
Is your car really insured?
Of course you have insurance on your special car. You’ve considered how many miles you anticipate driving, what the policy will pay in case of a loss, what hoops you have to jump through if you have a claim and, of course, premium price. And although you have a document from the insurance company in hand, I repeat the question: Is your car really insured?
Most collector-car specialty insurance companies have similar requirements. The car may not be used as regular transportation, either to run local errands, as primary transportation, for commutation to and from work, or even in place of the primary household vehicle when that vehicle is incapacitated. The car may not be used for racing or as a hired livery for either goods or passengers (this includes using the car for weddings, proms, or other special events).
The reason for these limitations is simple: the premium for a collector car is considerably lower than for the regular family car, based on the presumption that the collector car will be used less and in situations where it has less exposure to the chance of an accident. You may be the most careful of drivers, but when you take your well-restored and well-maintained collector car onto the freeway during rush hour, you are at the mercy of all of those other distracted drivers - distracted by cell phones, shaving, doing their make-up, finishing their dressing, eating their breakfast, reading the newspaper, and all of the other things that you’ve seen people doing while killing time on their way to work. In a nutshell, that’s it! That’s the reason for the lower premiums and for the severe restrictions enforced by the collector-car insurer.
All of the insurance companies are pretty definite about what constitutes use as a regular vehicle, and use as a collector car.
Let’s take another look at the three scenarios presented to the insurance companies, and see what their responses were, and why.
Robbin Terry, of Midwest Classic Insurance, put it this way: “You had three great questions and I have two great answers and one that nobody will like...”
1.) I take an antique vehicle to a local restaurant for dinner.
Almost all of the insurance companies questioned responded, “Sure, you’re covered. That constitutes an occasional pleasure trip, and that is allowed under your policy.” But, it was pointed out, if you are taking your wife, and perhaps another couple out to dinner (or lunch) that’s fine, but if it is a business client then you are in violation. Taking a client out removes the trip from the pleasure category (although it may be a pleasure for you to drive your car, and show it off) and places it into the business or everyday driver category.
2.) I drive to a local grocery store for a loaf of bread.
No go! Whether it’s to the local supermarket or to the hardware store or even to the auto parts store, it is considered using your collector car to run errands.
Okay, what if you are coming home from that trip to dinner and stop at the supermarket to pick up a quart of milk? It is not the supermarket that is the problem; it is the purpose of the trip. The trip is an “occasional pleasure trip” and the fact that you stopped on the way home for a quick something doesn’t change that.
Let’s reverse it then. You are going to the hardware store, and the supermarket, and have a stop to pick up dog-food at the local Petco, and maybe you have to get a haircut, too. And you stop for lunch along the way. It is still using the car in place of the family vehicle to run errands and that is in violation of your policy.
Gary Gandy, the Underwriting Manager for Heacock Classic Insurance put it this way. “You have to use the ‘Prudent Man’ rule. Is this trip what a prudent man would do? Instead of driving a Model A Ford, imagine that you were driving a million-dollar Duesenberg. Would you park that in the supermarket parking lot?”
So far most of the insurance companies are pretty much in agreement. An occasional pleasure trip is okay, but running errands is not. How many trips can you make and still be within the “occasional” rule? Does that mean that you can never take the car out to run an errand?
Let’s be realistic. Your insurance company is not going to put someone into the back of your car counting your trips. And frankly, if you don’t have a problem, and don’t make a claim, then they have no way of knowing whether you took a trip or not. An insurance agreement is a contract between you, a reasonable adult, and the the insurer, a gambler that you are not going to have an accident. And virtually all of the time, the insurance company will pay when you have a claim. One company representative told us right up front, “The vehicle is covered. Virtually regardless of the cause....” And it is what comes after the ellipsis that we will discuss in a moment.
But first, scenario number three:
3.) Living in Los Angeles, I take a trip up the coast to San Francisco, staying in motels/hotels along the way.
Of the three scenarios, it was this last that provoked the most contention. The insurance companies were pretty well divided down the middle as to whether or not the car would be covered under their collector program.
The pro stand was that it is merely a pleasure trip regardless of the distance, and, as an occasional pleasure trip you were covered.
The con side stated that this was a vacation trip, and so using the collector car was in violation because the collector car was being used in place of the family car.
The question of parking out-of-doors at a motel or hotel overnight seemed not to be a problem. Despite the fact that most (collector car) insurance policies specify that the cars must be stored in a closed and locked garage or storage facility, that refers to permanent storage. The insurance companies understand the need for out-of-door parking when staying at a motel/hotel (whether it is a pleasure trip or a sanctioned car-club event). Again, the “prudent man” rule comes into play. If your collector car has beautiful brass lights, brass horns, or other thief-tempting gee-gaws, don’t park it in a dark corner of a public parking lot. Although even parking it directly outside of your room doesn’t ensure safety, a theft there is less likely than in that dark, unpatrolled corner. It has been suggested that if your car is that vulnerable to theft, or removal of components, speak to the management about parking it just outside of the office, or, in a hotel, ask the doorman or valet to park the car under the front portico.
Back to the question as to whether the trip itself renders the car insurable or not. “Okay”, I granted the insurance companies that said that the car was not insured, “but what if I was visiting auto museums along the way?”
Sorry, still no! Whether it is an auto museum or an art museum or a natural history museum, it doesn’t change the intent of the use of the car. It is still in place of the family car.
“Let’s take it a step further”, I asked the insurers. “What if my ultimate destination was a car event, but I stopped at museums and other tourist attractions along the way?”
“That’s authorized, then”, they answered. “Now it is essentially a car-event, and the detours are part of the ultimate destination.”
This one was a real can-of-worms. It seems that this scenario, more so than any of the others, is subject to personal interpretation. It’s a moot point if you don’t have a claim, but if you do have an accident or any kind of claim, the insurance company can easily respond that you don’t belong there and so you have violated the terms of the policy. If you do have a claim and report it, the reviewing clerk might not understand the ramifications of the trip and deny the claim on general principles. It could very well require a series of letters and telephone calls to get to someone in authority who will review the case and make a final determination. You may lose, but at least you’ll know that you tried.
But better than chasing around after the fact, you would be well advised to make those telephone calls first, get the name of someone in authority and get a determination as to whether or not you are covered in case of a claim. Get the person’s name, and naturally try to get a statement in writing or even by e-mail before leaving on the trip. And if their answer is no, don’t tempt fate. Take the regular family car where your insurance is not limited. (Here in Southern California, Mexico is a popular destination. Travel to Mexico requires a special insurance policy. Be sure that you have it, whether you are driving a modern car or a collector car, before you cross the border. I cannot comment on special insurance needs for our northern border.)
Well that’s about it. Get a reading from your insurance company in advance if you know that you are going to be using the car in a way that differs from the norm. Almost all of the insurance companies finally said, “Yes, we will pay the claim, but if, when reviewing the case, we find that you violated the terms of the policy, we may drop you as an insured or refuse to renew your policy.” But legally the company must advise you by certified mail of an intent to drop your policy, and must give you adequate time (a subjective phrase) to obtain insurance from another company. If you apply for insurance, the new company may ask about your past insurance history; don’t lie. That constitutes grounds for declining a claim.
If you feel that you can avoid many of the conflicts that we’ve addressed above by insuring your car with your regular daily-driver insurance company, let us send up a big, red flag.
Virtually all insurance companies, outside of the classic car specialty, deal with claims based on Kelley Blue Book value, or on an hourly repair rate at a collision shop specializing in the more common Hondas, Toyotas, and Chevys. In almost all cases their collision repair consists of removing the damaged panel and popping in a new replacement. They generally don’t have the facilities to do the bodywork that you want for your collector car. If the insurance company has to pay for the precise hand labor to hammer out a dent in a heavy steel fender, the insurer is liable to place an arbitrary value on the car - based on marque and age and not necessarily on rarity, or uniqueness. Your 1956 Packard could be valued the same way that they value a 1982 Nissan, far below the actual value or replacement value of the car.
Most modern insurance companies are not skilled at valuing an antique or collectible car. You could find your classic totaled out by the insurance company and a check in your hand which wouldn’t buy a set of tires for that now-deceased classic.
Go with the specialists; they know this unique business, and they can provide the special services that your collector car requires. The collector car specialists understand the value of your car and can talk knowledgeably about condition, rarity, what your car is worth, and repair/replacement values. Don’t make your decisions based solely on price. Although most companies are similar, the services that they provide do vary, and one policy might fit your needs better than another.
Let’s sum it up with a direct quote: “Yes, the collectible auto policy issued through J.C. Taylor provides full coverage in every outlined scenario... Our antique automobile policy is modeled after a private passenger auto policy with the major exception being the Agreed Value Physical Damage coverage. The Agreed Value is the amount of coverage on a vehicle to protect against damage” (as opposed to basing value on the Kelley Blue Book).
Shop around, write letters and solicit information that will best fit your needs. What you need is out there. Policies today are often much more liberal than in years back offering unlimited mileage, special exemptions for car-club events, etc. It is no longer necessary for you to just accept what they are offering; there may be a better deal just around the corner.
We owe a special thanks to Mr. Robbin Terry of Midwest Classic Insurance. Mr. Terry pointed out another problem with collector-car insurance. One that we never considered and, frankly, were completely oblivious to.
Regularly, Mr. Terry informed us, in order to save a few dollars, owners of collector cars suspend their collector car insurance (except for the comprehensive, figuring that they are not going to drive it so why pay) when the car goes into storage, only to re-activate the policy when it comes out of storage in the Spring. That could be a really big mistake.
Homeowner’s insurance policies exclude coverage when working on cars. That includes new cars, classic cars, operational cars or, in the case of cars in storage, non-operational cars.
Once you’ve cancelled that collector car policy, it is uninsured! If something falls onto the car - not covered. Slipping off jack stands - not covered. And the most serious consideration: if you or a friend are working under the car, and the car slips off the jack stands, you are not insured! In case of permanent disability or death of a friend or neighbor, that little saving of dollars could cost you your home, your savings, and everything that you’ve worked for all of these years. Think about it. Is it worth the few dollars that you’ve saved?
Other thanks go to J.C. Taylor, Grundy Worldwide, Heacock Classic Insurance, Sneed Insurance, Midwest Classic Insurance and others for their assistance and input in helping to gather facts for this article.
This article originally appeared in the February 2008 issue of Skinned Knuckles. It is copyrighted by SK Publishing and may not be reproduced, in whole or in part, without written permission from SK Publishing. See Skinned Knuckles for more vintage and classic car tips. Also see vintage car repairs and these other articles from Skinned Knuckles (at allpar.com):