For owners of classic and collector automobiles, the car is more than an instrument to get from point A to point B – it is a way of life. There is no other place that one can see this more clearly than at the annual Woodward Dream Cruise.1 Each year, millions of classic car enthusiasts travel to Metro-Detroit’s Woodward Avenue to cruise their car or gaze at the rolling works of art.
Bill Gatewood, Corporate Vice President and Director, Personal Insurance, Burns & Wilcox, describes collector car owners as treasurers of nostalgia, with emotional ties to their vehicles.
“It is not like insuring a family sedan. These cars are truly works of art,” said Craig Dennis, Senior Underwriter, Brit Global Specialty at Lloyd’s of London. “Sometimes, these vehicles are one-of-a-kind or there are just a handful of them left in the world.”
Getting in the head of a collector car owner
Owning a collector or classic vehicle is often tied to a point in one’s life. Stories of current Corvette owners are told time and again of the first time they watched one pass while sitting in the back of the family station wagon. In 2014, the Corvette and collector car world was shocked when a sinkhole opened up beneath the National Corvette Museum in Bowling Green, Kentucky swallowing eight cars and resulting in $3.2 million in damage.2 This collector car tragedy prompted much conversation on insuring cars of historical significance.
“Unlike other areas of specialty insurance, we are dealing with very educated consumers in this space,” said Gatewood. “They often know the history of the car, all the work that has been done on it, and many owners even know the names of all previous owners.”
Automobiles connect families, too. An eight-year-old boy once made a lofty promise to his dad that he would buy him a 1957 Chevrolet Bel Air on his birthday. When the boy grew up, he found a way to make it happen for his dad.3 Stories like these fill entire television channels and programming, such as Velocity and Discovery.
“Cars are these people’s flesh and blood – they are like another member of the family,” said Dennis. “Brokers need to respect the way in which these cars are used and maintained.”
Some larger scale car collectors have been known to keep their collection in buildings reminiscent of museums with temperature and moisture control systems and on-staff mechanics to perform regular maintenance. While the risk is different than a collector with one car, the love for cars is all the same.
Going beyond standard carriers
In speaking to the importance of using a specialty carrier, Gatewood says, “It is important that when a classic car is insured, it is covered by a carrier that is just as knowledgeable and passionate as the owner.”
Standard policies also have limitations that collector car owners may not realize or may hold their experience back. For instance, Dennis says that many standard policies do not cover a collector vehicle that is being transported and not under its own power. Other exposures include lack of road risk coverage, mileage limits, and ambiguous museum loan agreements.
“The toughest class to insure are people who like to race their antique cars like 1950s Porsches,” said Gatewood. “These individuals are not going to get insurance in a local strip mall.”
Specialty carriers knowledgeable in this space work with vehicle owners on where they would specifically like their car sent for claims repairs. This is significant because if the collector vehicle needs to be fixed due to a claim, the insurer needs to know how to have it repaired and understands that it has to be fixed to certain specifications with original parts. Gatewood described that aftermarket parts – which are often part of standard policies – devalue collector vehicles.
How value is determined
Condition, usage, significance, provenance, and the number of vehicles produced can all affect the value of a car. In looking at a 1960 Lincoln Continental limo, the average value is $36,100 – with only 136 ever built.4 However, the same limo sold at Barrett-Jackson for $566,500 as it was the personal limo for the King of Rock and Roll, Elvis Presley.5
“When determining value of a collector vehicle, the owner, appraiser and insurance carrier most often determine an agreed upon value for the vehicle,” said Dennis. “However, certain states require that the value to be set at market or replacement costs and do not allow for agreed value policies.”
Dennis added the market values spike during certain times of the year, specifically when large collector vehicle shows occur such as the Pebble Beach Concours d’Elegance. For this reason, brokers should advise collectors to keep their eye on the market and track those movements.
The 1962-64 Ferrari 250 GTO is a celebrated piece of racing history, and one 1962 model recently sold at Bonham’s Monterey auction for $38.115 million – making it the most expensive car ever sold at auction.6 Only 39 of these cars were built in the three year span. Recently, one of Dennis’ clients was in a minor road accident with his rare Ferrari 250 GTO.
“We could have sent the vehicle to a local shop to repair the damage and respray the paint for approximately $25,000,” said Dennis. “However, to maintain the integrity and provenance of the vehicle, we shipped the vehicle back to Maranello, Italy to have the correct Ferrari technicians complete the work – at a cost of approximately $225,000.”
Keeping the integrity of the vehicle is an important aspect to collectors and investors. A recent shift in the collector car market has been evident in Dennis’ point of view. He has seen collector cars turn into investment opportunities, as an asset that appreciates over time with the right automobiles.
If your client is working on a project car
Classic and collector car owners come from all walks of life, and few are fortunate enough to have large amounts of disposable income to support this hobby. Some hobbyists have one project car in their garage that they have been working on for 10 years, while others may have collections with more than 100 cars in it.
According to Gatewood, “Cars in progress would not be covered under homeowners insurance. Brokers should have a conversation with their clients about insuring their non-running project classic vehicle for physical damage.”
If the car is not being driven, liability insurance is not needed. Liability coverage can be added on a short-term basis (i.e. for the month of August) if the vehicle is being driven to a show.
“If a client is working on a car in their garage, and if it is stolen, destroyed, or set on fire, homeowners insurance will not cover the vehicle damage,” said Dennis. “Brokers and agents should work to understand the interests of their clients and advise on tailored insurance for their non-roadworthy vehicle, especially with all of the flammable automotive fluids around.”
Classic cars are vehicles that are more than 25-years old. While 1991 may not seem like that long ago, cars from that year are now considered classics. And, every year comes with a new class of vehicles that can be labeled as such. Collector cars do not have to be classics cars either. Having the proper valuation and determining usage are the two most important points in insuring a collector vehicle. Brokers and agents should seek to identify a specialty insurer with a long track record of understanding the culture and insuring these modern works of art. For many car enthusiasts, their car is a part of the family.