Do you own a restored vehicle, classic/antique car, sports car, hot rod, show car, or custom car? If it is insured on your regular auto insurance policy, you probably don’t have the coverage you think you do.

Say you buy a second car as a project, a 1965 Mustang for $5,000, and you restore it. The value of the restored Mustang is now $15,000. You call your insurance agent, and they adjust your insurance premium to reflect the $15,000 value of the Mustang.

Someone steals the Mustang 2 weeks later and it is never recovered. The claims adjuster investigates the claim. You show the adjuster all the evidence of the restoration, but the adjuster disagrees the value of the car was $15,000, and offers you a total loss settlement of $10,000.

You paid insurance premiums based on a stated value of $15,000, but the most your auto insurance company will pay you is $10,000? Isn’t this a rip off? But it’s legal. And it happens all the time to car insurance customers not understanding the coverage they’ve purchased.

My blog post today will tell you about insurance coverage options, how to avoid mistakes, and what you can do to protect yourself from not getting the proper value for your restored, custom, or classic car, if you have a claim.

The biggest mistake auto insurance customers make with custom, classic, or restored cars is they insurance them on their regular auto insurance policy.

Your regular auto insurance insures cars on an actual cash value basis (ACV), which is basically the market value of the car. Regular cars, even luxury cars, depreciate as they get older.

Rare, older cars in very good or mint condition, custom cars, and some sports cars can appreciate in value. Restored or mint classic cars can be worth a lot, where the same car, non-restored, rusted, and barely running, may be worth almost nothing.

How does your insurance company know your 1970 Dodge Challenger is restored and worth $36,000, and not a $500 junker?

Part of The claims representative’s job is to determine the fair pre-loss value of your car. The adjuster is not going to deliberately cheat you, but insurance companies actively control their claims expenses, so they don’t “over pay” a claim. If your car is worth more than your model car in average or good condition, it will be up to you to prove it.

Keep receipts of all restoration you do to your car. Make note & have documentation (pictures/receipts) of any parts or features which add to the car’s value as a whole. Keep in mind I’m talking about something like a vintage car with all original parts. I’m not talking about a $1,500 car you’ve paid $5,000 in repair costs to keep running, and now you think the car is worth the $5,000 you paid into it.

It’s great to keep an up to date car appraisal, but the insurance company can dispute the appraisal. Your car insurance company does not pay more than the actual cash value of your car.

The actual cash value can usually be fairly determined by recent comparable sales in your area. Determining the actual cash value is difficult for rare, classic, custom, and restored cars, because comparable sales in your area are hard to come by.

There is an appraisal clause in auto insurance policies, where if you and your car insurance company can’t agree on the value of your car, you can each hire an appraiser, then split the cost of a third appraiser as judge, if needed, to decide the fair value.

Sometimes the actual cash value settlement on a regular auto insurance policy can work to the customer’s advantage. An insurance company where I worked, paid $15,000 on a total loss claim for a 1970s American model pick up, where the premium we charged grossly under-estimated the value of the vehicle.

Remember though, this customer had the negotiation skills and documentation to prove the high value of his pick up. Usually, when total losses occur with these type of vehicles, the customer does not get paid as much as they expected.

I worked in sales & customer service, but the claim was brought to the attention of my department, to make sure we rated auto policies properly, and not charge beater rates for restored or classic cars and pick ups with higher market values.

This is where customers are misled, but not deliberately, to think they are insured for specific amount, when they tell their regular auto insurance company about the value of their classic or restored vehicle.

Regular auto insurance companies have a special, lower rating for classic or antique cars based on a stated value, and the use of the vehicle.

If I had spoken to the pickup truck owner in the claim discussed above, found out it was in mint condition and worth 15,000, I could have adjusted & increased his premium based on the $15,000 stated value.

However, I also would ask if it was driven only for car shows & parades, and if so, I would be able to lower the rate to the classic car rate.

Important: Adjusting the premium based on the $15,000 stated value, does not guarantee the customer will get $15,000 for a total loss claim. It is still an actual cash value settlement, so the adjuster will pay the actual cash value of the vehicle prior to the loss, or the stated value, whichever is less.

This is how it works: Say the pickup owner talked to me several years before the claim, and at that time, the value of the pickup was $10,0000. I rated the policy at the stated value of $10,000, but since the pickup is driven daily, I do not apply the lower classic car rating for car show vehicles.

If the stated value was not updated before the claim occurs, the customer would get $10,000 instead of the $15,000 actual cash value of the pick up.

Many insurance agents and insurance company employees do not understand auto insurance policies are still settled by actual cash value, if it is lower that the stated value, when stated value is used to rate the policy.

You can get the stated value, but if the claims representative concludes the value is lower, it is up to the customer to prove the vehicle’s value is the stated amount.

Adding to the confusion, many insurance companies require a bill of sale or appraisal to insure for stated value, which leads customers to believe they will be paid the appraisal amount, and not be subject to a lower amount, if the market value is lower at the time of the loss.

Stated value helps the insurance company get the proper price for the potential value of the vehicle. It does not give the customer better coverage, so you would not think an appraisal would be needed.

Are there any better options than stated value for your classic, customer or restored car?

Yes! Some insurance companies offer an AGREED value settlement for your classic, custom, or restored car.

National insurance brokers like Hagerty, Grundy, or American Collectors, offer collector car insurance with AGREED value — this means the insurance company will pay you the agreed amount for a total loss, no matter if the market value has changed.

You will have to qualify, but the rules may differ among these specialty insurers, so check with all the brokers to see if you are eligible.

The usual requirements are:

1. All drivers must have a certain number of years driving experience, a clean driving record, and another car for daily use.

2. There are sometimes annual mileage limits.

3. The car may need to be kept in a garage.

4. There is usually a no commuting clause.

5. Restrictions on who may drive the car.

6. Coverage may be limited during restoration.

If you have an agent, there is a very good chance your agent may work with one of the insurance brokers above. But if your insurance agent insists your current coverage is good enough, have your agent show you there is no clause in your auto insurance policy, stating you will get the stated amount or actual cash value, whichever is lower. Have your agent give you a copy of your policy, and make sure that wording is not part of your policy. The insurance company should AGREE to pay an AGREED value or amount, regardless of the market value at the time of the loss.

If you need help, you can take your policy to a competing agent, working for another insurance company, for a second opinion.

If an agent cannot describe the difference between stated value and AGREED value, they don’t have the expertise to help you. You should also contact one of the specialty brokers I mentioned above for another opinion. Some of them offer quotes online.

If you belong to an auto club, ask the other members about their collector car insurance, and what company they use. Some collector car brokers are sponsored by a car owner group. For example, Porsche Club of America currently sponsors a plan for Porsche owners through Leland West.As always, comparison shop for the best rates & insurance coverage for you.

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