Car Insurance Tips - Worst-Case Scenario

You really have to feel pity for "the other guy." He's the one you always hear about, and bad luck seems to be his constant companion. Maybe his car was stolen, wrecked in a crash, or burnt to a cinder in a fire. May 5, 2007, was the day I became the other guy. I had just taken my '68 Camaro out of the shop, and was finishing the last details. Two weeks on the road and 500 miles on the odometer was all I got to enjoy before an inattentive driver crushed my car, along with my hopes of a summer filled with cruising. I was just happy the guy had insurance, and that I wasn't on a gurney. I was simply in the wrong place at the wrong time, and it can happen to anyone.

In a way, I lucked out. I was zero percent at fault, and the other guy had a good policy through State Farm. My car was also freshly done and heavily documented. The rough estimate to fix the carnage was $35,000, and State Farm offered $21,000 to fix it, to which I chuckled. Insurance companies are not used to dealing with classics-they generally deal with wrecked Toyota Camrys. Because of this, their labor rates are based on "production shops," and not shops that do classic cars. They wanted to pay $48 an hour for the repair, but our shop charges $75 an hour. Again, since I wasn't at fault, I was in a good position to negotiate my point. After several more discussions between the adjuster, the estimator, and my shop, State Farm agreed to fix the car at our chosen shop. They also agreed to our shop's labor rate, so long as all the work would be documented. Don't be afraid to argue your case with the insurance company, and if you feel you're in the right, there's always small claims court as a last resort. Consider this a victory for the little guy. But there are so many ways this could have gone badly-very, very badly.

The GPS Snitch
Protecting your car can be as expensive as an alarm system, or as low-buck as a cleverly hidden kill switch. Neither will protect you from a pro with a flatbed, but every bit helps. Another option is a GPS tracking device. A brand-new one we like a lot is called the GPS Snitch, sold through MuscleRodz. It can be hidden anywhere, and is programmable to call your cell phone if your car is tampered with. Once notified, you can pop online to see exactly where your car is, and, if necessary, notify the cops. Or take matters into your own hands, if you prefer. Look for a story on the GPS Snitch in an upcoming issue of PHR.

Fickle Finger Of Fault
There are two things that determine how well things will work out for you if something happens to your ride: fault and insurance. If the accident is your fault, then the quality of your insurance comes into play. If it's the fault of another party, then their insurance matters most. Nonetheless, even if you bear no fault in the accident, you can still get hosed if the other person is uninsured or under-insured. In this case, your insurance comes back into play, but only if you have uninsured motorist coverage.

When buying insurance for your musclecar, assume you'll use it. Buy it like you know that any accident will be your fault, and that the other party thinks insurance is something only bought at the blackjack table. Going cheap on auto insurance is a bad investment. If the guy that hit us was uninsured, we would've been in much worse shape, because we hadn't yet upped the Camaro's coverage.

"Stated" Versus"Agreed" ValueThe most important part of your insurance is whether your car is covered under a "stated" or "agreed" value policy, and it's critical that you know what your current policy is. Many people are in a cleverly worded stated-value plan, and mistakenly think they have an agreed-value policy. We asked McKeel Hagerty, CEO of Hagerty Insurance, about the differences. "Both stated-value and agreed-value policies can cover a collector vehicle for its full value," he says. "But because stated-value policies are only required to pay up to that amount at the time of a total loss, there is still wiggle room for the insurance company. Only agreed-value policies guarantee that a collector will be fully paid in the event of a loss. This is why we only sell agreed-value policies." The wiggle room mentioned here is where you can really get screwed. According to Chuck Wasoski of Grundy Worldwide, "In a stated-value policy, the insurance company will pay the lesser of the stated value, the cost to repair the covered auto but not to exceed the stated value, or the actual cash value. With the agreed-value policy, the insurance company would either pay the total agreed amount, or the cost to repair the auto (not to exceed the agreed amount)."

As you can see from the stated-value plan, the insurance company can always exercise the "or" option, and opt to pay you based on the actual cash value. This isn't the same as the value you stated-it's what they think the car is worth. After all, they never agreed with you about the value of your ride in the first place, they merely wrote you a policy for what you stated it was worth. Get the picture?

Some people have neither of these policies, and just add their classic car to the policy covering their daily drivers. In these cases, the insurance company is most likely going to pay based on Blue Book value. Good luck convincing them to cover that new 383 stroker motor you dropped in last month. To them, it's just an old car with little worth. What's the moral of this story? Go with an agreed-value policy, or suffer the potential consequences.

Specialty Insurance
Classic musclecars are all the rage, and given their surge in popularity, many traditional insurance companies are getting into the collector coverage game. This isn't necessarily a bad thing, except that their appraisal and claims departments are sometimes geared more toward normal cars-not one-of-a-kind customs. According to Hagerty, "While several of the general auto insurance companies now offer agreed-value policies and try to convince collectors that a multi-policy discount is the way to go, they are really not in this business, and their claims handling would prove it. The big companies are great at regular cars, but classic cars need special attention."

At Grundy, Wasoski echoed this idea. "The advantages with a specialty company will basically come down to cost," he says. "Collector rates could be as much as 75 percent less than standard car insurance companies. If a claim occurs, a collector car insurance company has more experience with how to handle it properly."

Protecting Against Theft
It's said that the best defense is a strong offense, and this is true of protecting the investment in your hot rod as well. Having your ride swiped is about as bad as it gets, for several reasons. First, in most cases, the insurance company will want to wait a certain amount of time (sometimes several months) to see if your car is recovered. Second, you will only have documentation like receipts and pictures to argue what the car's worth. Having a current appraisal or an agreed-value policy will really help in this regard, but it's no guarantee. Take the time to make your car a less tempting target. While no single thing will make you 100 percent safe, there are a few tricks that may convince the crook to move on to an easier target.

Limits On Use
One way specialty insurance companies can charge you lower rates is by putting rules into place that limit the chances for a claim. Many companies place restrictions on how many miles you can drive your car each year; but other companies, like Hagerty and Grundy, don't have actual mileage limitations-they have limits on use. Both want to know that this isn't your primary means of transportation, and that it's mostly used as a hobby. Both also want your ride stored in an enclosed garage, and neither will cover you at the race track. Almost all specialty insurance companies have some restrictions. In general, we found that as restrictions decrease, cost increases-and quickly. Shop around and find a company that will sell you an agreed-value policy at a price you can afford, with restrictions that work for you.

It's important to note that racing modifications are a touchy area. Some specialty companies won't insure a car with a rollcage or nitrous, while others will make you sign a statement that you won't race the car. Again, when shopping around, it's critical that you ask questions specific to the way you use your car. We asked Hagerty about his take on modified cars, and he said, "We are definitely more cautious about certain types of racing modifications. We have a fairly strict racing restriction in the policy, so we are not too concerned about racing itself when people are open about it, because we simply do not cover racing losses. Nitrous is a bit of a special case, as we have seen spectacular losses resulting from faulty installations and poor storage and handling. So we will not currently insure vehicles that have active nitrous systems. We will occasionally make exceptions if a vehicle has the system but it isn't activated." When we called Grundy for a quote, it didn't exclude cars that have nitrous from coverage, but when hearing of our Camaro with a rollcage, we would have had to sign a letter stating we wouldn't race it. Like we said, shop around for a company that fits your automotive lifestyle. If you find a smaller company willing to cover your 10-second street car-even at the track-be sure to dig around about its rating and how good its service is on claims. Only go with companies that have an A or A+ rating. It won't matter how good the policy sounds if it can't, or won't, pay out on a claim.

Heacock Classic insurance does it a bit differently. With this company, you buy your policy based on use (1,000, 3,000, or 5,000 miles, for example). According to its underwriting manager, Gary Gandy, "We are less concerned with racing-style modifications than we are with the way the car is used. We won't cover a stripped race car with license plates, but we have no problem with a modified street car." Grundy also allows for liberal pleasure cruising, and will cover your drive to the track-but don't expect coverage in the staging lanes and on the track. Want to take the wife for a spur-of-the-moment cruise up the coast? No problem. Just don't drive it to work or to Home Depot for a load of lumber.

Remember, you ask plenty of questions when shopping for insurance. Find out if your car is covered if parked overnight at a hotel. It would sure be a buzz kill if you couldn't attend a multi-day event like the Power Tour because of an insurance restriction. Also, ask if they offer discounts for security systems like alarms and GPS tracking devices.

Appraisals
The amount for which you need to insure your car is determined by its value. Many specialty companies don't require you to get an official appraisal; instead, they rely on what the owner feels their car is worth. Hagerty tells PHR, "We work very closely with owners to make sure they feel completely covered before we issue a policy. When someone has no clue what their car is worth, we often suggest a value range. Because hot rods and customs are unique by nature, we sometimes have the owners complete a worksheet to help us understand what the car actually is, and how much went into it. Only on very rare occasions do we require an appraisal from a certified appraiser." If you bought your hot rod already built, then you can go by the bill of sale for value. Even if not required, having your ride appraised can serve as proof of its value in case of loss. It's also a good idea to keep detailed records with pictures and receipts. Just make sure you keep that information in a safe spot where your wife can't find it.

The Bottom Line
Do your research and shop around. Besides the big guys, there are many smaller companies providing specialty policies. We didn't find any that would cover a car while it's racing-and who can blame them? Nonetheless, we did find some that would cover your trip to the track, and even cover you while in the pits or paddock. One such company was Heacock Classic. We asked Gandy what tip he would offer to someone shopping for coverage, and he said, "People often get too fixated on covering the car, and forget to get enough liability and uninsured motorist coverage. This coverage should be the same as that which you carry on your daily driver." You also need to look at all the benefits each policy offers. For example, Grundy and Hagerty both offer roadside assistance for an extra fee, whereas Heacock Classic includes this at no additional cost. When comparing prices, make sure you're doing a fair "apples-to-apples" comparison. A cheaper policy isn't necessarily a better deal if it offers less protection or fewer benefits.