Is Your Car Truly a Classic--or Is It Just Old?

Do you own a '57 Chevy Bel Air, '65 Ford Mustang, 1964 Pontiac GTO, 1975 Chevrolet Chevette, or other classic car?

There is classic, and there is just plain old. Just plain old cars don't need classic car insurance, but a collectible car just might benefit from a specialized policy. Collector or specialty car insurance policies recognize that these cars are rarely driven, usually very well cared for, and are worth significantly more than their book value.

There are some things to consider when you are shopping for insurance for your classic because there are often restrictions on use, and differing methods of valuation.

Restrictions on Use

If you drive your car, as opposed to having it stored in a museum, you want coverage while you are on the road. Some policies limit the number of miles you are allowed to drive in a given policy period or year.

Other classic car policies not only limit mileage, but also restrict your use to public display events or parades. This means you would be covered while driving to a parade, during the parade, and on the way home. Take the car out for a spin after polishing the chrome, and you may not be covered.

Examine any use restrictions included in your auto policy carefully, and make sure they fit your needs.

Valuation Methods

There are three ways to value a car at the time of loss:

1. Actual Cash Value (ACV)
2. Stated Value (SV)
3. Agreed Value (AV)

Actual Cash Value (ACV)

Most standard auto insurance policies settle claims based on the ACV method. ACV is defined as "replacement cost less depreciation." This means that ACV values your fully restored, all-original 1965 Mustang exactly the same as the one your neighbor's kid painted with three different colors of spray paint. While ACV is a perfectly fine way to value most mass-produced cars, it doesn't reflect the value of a collectible or classic car, especially one that is restored.

Stated Value (SV)

SV policies are undoubtedly the least understood policy in auto insurance. The customer tells the insurance company how much the car is worth, often backed by an appraisal. The premiums charged are based on your stated value, and it is the most the insurer pays you for a loss.

Most people, including many insurance agents, think that the SV is what the policy pays, no matter what. But you could get less--significantly less.

Settlement clauses usually state that the insurer pays the lesser of the SV: the cost of repair or replacement up to the SV or ACV. If the car's value appreciated, you may not recover full value. Additionally, the ACV could be significantly lower than the SV.

SV policies often put a maximum limit to what a policy pays on a claim, without providing a minimum limit.

Agreed Value (AV)

AV policies are preferred for classic car coverage because they always pay the agreed value in the event of a total loss. There is no depreciation, no ACV, and no losses for downward market fluctuations. You and the insurance company agree on a value, you pay premiums based on that value, and claims are settled on that value. Your only risk is that if the market value of your car increases, and you don't increase the AV on your policy, you may not be able to replace it. It is a good idea to evaluate the current value of your car and the stated AV at each renewal.

Compare Quotes

Regardless of the type of car you own, you should continually compare car insurance prices. Pick the right coverage for you and your classic car.

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