Collector car insurance: agreed value, and what it asks of you

Standard car insurance is built on the assumption that your car loses value every year. Collector cars do not reliably do that, and a policy written on that assumption will pay you the wrong number after the worst day of your ownership.

Sort this out before the car is delivered, not after.

The three ways a policy can value your car

Actual cash value. What an ordinary auto policy does. After a total loss the insurer decides what the car was worth at that moment, applies depreciation, and pays that. For a collector car this is the wrong answer almost by definition: the adjuster's data has no idea what a correct, documented example of your car is worth, and you are left arguing from a weak position.

Stated value. You name a figure. Read the policy language extremely carefully, because many stated-value policies pay the lesser of the stated figure and actual cash value. That means you may be paying a premium calculated on your number while retaining the right to be paid their number. Stated value sounds like agreed value and is not.

Agreed value. You and the insurer agree a figure in writing when the policy is written. On a covered total loss that figure is what gets paid, with no depreciation argument. This is what collector policies exist to offer and it is the reason to use a specialist carrier.

Ask the question in exactly these words: "On a total loss, is the payout the agreed figure, with no depreciation and no actual-cash-value comparison?" Accept the answer in writing.

What the agreed figure should be

Not what you paid. What it would cost you to replace the car with an equivalent one, today, including the buyer's premium and the transport you would pay again.

Underinsuring to save premium is a false economy that only reveals itself once. Overinsuring is not free either — carriers will ask for substantiation, and an unsupportable figure invites a dispute at exactly the moment you cannot afford one. Support the number: the purchase invoice, the inspection report, photographs, and an appraisal if the car is unusual.

Then revisit it. An agreed value set three years ago on a car whose market has moved is an agreed value that is now wrong, and the policy will not update itself.

What collector policies ask of you in return

The premiums are usually markedly lower than standard auto insurance, and that is because the underwriting assumes the car is used differently. Common conditions:

• A secured, enclosed storage location. Often inspected or at least attested. Street parking is frequently disqualifying.
• Another vehicle for daily use, insured separately. The policy is not meant to cover your commute.
• Mileage limits, or a usage definition — pleasure use, club events, shows. Some carriers now offer unlimited-mileage collector policies; most tie the premium to a band.
• Driver criteria — minimum age, clean record, and named drivers only. A friend borrowing the car may simply not be covered.

Each of these is a term you can breach without noticing. Read the usage definition and be honest with yourself about how you intend to use the car, because a claim is when the mismatch surfaces.

The gaps people discover late

During transport. The carrier's cargo insurance is the carrier's, with its own limits and exclusions, and it is not a substitute for your own coverage. Confirm what your policy covers while the car is on someone else's truck, and confirm it covers the car before you have registered it.

At the auction venue. Between the hammer and your collection, the car is somewhere, and whose policy covers it there is a question with a real answer. Ask.

While it is being worked on. A restoration shop's garage-keepers coverage may be far below the value of your car, and it may be the only thing standing between a shop fire and your loss. Ask for the certificate.

Spare parts and tools. Often excluded, or capped low. If the sale included a pallet of rare spares, they may be worth insuring specifically.

One practical order of operations

Get the agreed-value quote before you bid, using your intended maximum as the figure. It costs nothing, it tells you the real annual cost of owning the car, and occasionally the quote itself is the thing that tells you the car is a worse idea than it looked.