Cover Your Assets
10/01/2005
In the mid-1990s Holly Bromberg bought himself a Porsche 911 Cabriolet as a treat for weekend driving. But when he put the car on his regular-use insurance policy he received something of a shock. “It added $3,200 to my premium,” he says. “I was 32 and I had a perfect driving record. I got other quotes, but they were just as expensive.” Bromberg—who had a background in product liability—decided this was nonsensical and launched Leland-West, an insurer with a twist. As well as insuring the classic cars such companies typically cover, Bromberg would offer coverage for those like himself who wanted a weekend toy. “We [also] created a plan for people who buy new sports cars,” he says. “Everyone laughed at us but we said, let’s give people options.” Today, this coverage is more common in the industry, and it is the type of innovation that makes Leland-West—and competitors such as American Collectors, Condon & Skelly, Grundy Worldwide, Hagerty, J.C. Taylor, and Parish Heacock—so appealing to automotive enthusiasts. Essentially, if that classic Ferrari Lusso or limited-use Morgan Aero 8 in your garage is not yet insured with a specialty firm, it should be.; function voidFunc() { } voidFunc();)
(Click image to enlarge.) The most appealing aspect of such insurance is that it not only offers coverage superior to that offered by regular-use insurers, but it comes at a fraction of the price of adding a car to the policy you have for your everyday Range Rover. This might sound like infomercial hype, but it isn’t. Even though the value of a classic car can easily exceed that of a new luxury car—replacement costs are often stratospheric—there are reasons that a premium does not have to cost the earth.
For starters, classics and exotics see far less road time than that Range Rover. While regular-use policies generally allow for between 12,000 and 15,000 miles a year, how many miles will you really put on a new Murciélago or a V-16 Cadillac? Wander through the showroom of a Lamborghini or Bentley dealership and you will see plenty of two-year-old cars with only 2,000 miles on the clock. Second, the owners of such cars are a fastidious lot, and they typically drive their cars with extreme care. Often, the owners have been directly involved in a restoration project. They might have spent years looking for the right car before investing time, money, and emotion in an exacting restoration. The cars preening on the lawns of concours d’elegance are in better shape than when they left the factory, and the mere thought of a fender bender, let alone a spectacular crash, has the potential to induce heart failure in collectors. Furthermore, these cars are typically housed in locked—and often climate-controlled—garages. “It’s more like insuring a work of art,” says McKeel Hagerty, whose eponymous company insures both collector classics and new exotics. “It’s protecting someone’s passion. They really love their cars.”
Another reason that classic insurers can keep premiums low is that they have a selective process that tends to ensure that applicants are on the up-and-up when describing how they use their cars. “If the daily automobile is nice, it’s logical that they won’t want to take the classic to work,” says Bromberg. “But if the daily driver is a beat-up old car, that raises a flag.” You also have to have a fairly decent driving record. “It isn’t pricier if you have four tickets instead of two,” says Hagerty. “We just don’t insure you. You’re either in the box or out of the box—but it’s a pretty big box.” The insurance world’s seemingly omnipresent bugbears of fraud and irresponsible policyholders appear to be far less problematic for these niche companies. But, occasionally, even seasoned screening can stumble. “We got a claim on a ’63 Corvette late one night,” says Bromberg. “We called the owner and all he would say is that we needed to talk to his lawyer. But that’s the exception rather than the rule.”
It’s important to know what kind of policy you’re getting. There are three basic varieties: an Actual Cash Value policy, typically written for new cars and relying on the used car market to arrive at a car’s value; a Stated Value policy, which often factors depreciation into the claims process; and an Agreed Value policy, in which everyone agrees on a car’s value upfront—and in a total loss that’s exactly what you get. Guess which one you want. The case for an Agreed Value policy is straightforward, and it’s the only type some companies offer. “One of the reasons insurance companies are at ease insuring older cars on an Agreed Value basis is that their values have already hit rock bottom, and they might be appreciating,” says Gary Gandy, vice president of Parish Heacock.
One advantage of choosing regular-use policies is that you rarely have to
wonder if you’re insured for certain activities. As long as a licensed
driver
pilots the car, you are covered for just about any
eventuality.
But the
trade-offs for low premiums on a classic
car policy are
restrictions, and you
might have to break
yourself of the habit of
using the car however and whenever
you like. The most obvious is a
mileage limit—usually 2,000 or
3,000 a year. But
the trend seems to be
moving away from using
this as an arbitrary restriction.
“Mileage isn’t
a very
effective measure,” says Hagerty. “If it’s consistent with
limited use, we trust our customers. It’s very much the honor
system.”
Exhaustively consider every way in which you use your
car before
initiating
conversations with an insurer. Never make an
assumption about coverage—know
exactly what your policy
allows. Don’t
be embarrassed to ask questions, even if
they
seem to have self-evident
answers.
If, for instance,
you personally trailer your car to shows, you will want to
know if the
car is insured during transit. And are you covered if a third party
transports your car? Ask if you will be reimbursed should the car catch
fire in
your garage. And what if the same car catches fire in your
mechanic’s garage?
Garages and restoration shops typically have
policies that are limited in
liability and are not sufficient to cover
all the cars in the shop in the event
of a catastrophic event, like
fire. “Let’s say you have a Morgan in a shop with
$1 million in
liability insurance,” Gandy explains. “It’s sitting next to an
original
$4 million Daytona coupe and the place burns down. Chances are your
$30,000 Morgan is going to have a hard time competing for that
liability
insurance. If you have our comprehensive and collision on
your car, you’re not
left holding the bag, regardless.”
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(Click image to enlarge.)
And what about a car that gets reduced to a greater and greater number of
pieces—either in your garage or your mechanic’s—as your routine tune-up turns
into a ground-up restoration? “Some other people don’t like to do it, but I will
insure a car that is under restoration if it warrants that kind of coverage,”
says Gandy. “No one does a rotisserie restoration on an MGB, but if it’s a Hemi
’Cuda or a Shelby GT350, we’ll insure it whether it’s in a shop or in your
garage.” Does the policy cover Sunday drives as well as excursions to club
events? Find out which drivers will be covered and which will not. Reading the
fine print is your responsibility—pleading ignorance won’t get you very far if
something goes awry.
There are a few instances where insurers almost always suspend coverage—among
these verboten activities is the drive to work. And it’s a virtual certainty you
won’t be covered on the track. “You’re insured while on the trailer and being
unloaded,” says Leland-West’s Bromberg. “Once you’re on the track you’re on your
own.” Hagerty’s policy follows the same tack. “We don’t insure on the track,” he
says. “You have an expensive hobby, and I wish you well.” Parish Heacock’s
coverage similarly ends at the racetrack’s edge. According to Bromberg, there
have been some issues with car clubs’ labeling track days as “educational”
events; be sure you’re clear on semantics, and how they might impact your
insurance before you head out onto the track during one of these events—and get
it in writing.
Classic insurers pride themselves on a personalized level of service that
they say regular-use insurers simply can’t provide. “We try to pay claims the
same day we receive them,” says Bromberg. “And if there’s a problem I do
whatever I can. I get involved.” The fact that he lists his own e-mail address
and phone number on his web site gives credence to the claim. Hagerty, which
numbers its policyholders in the hundreds of thousands, says that its relative
size gives it an edge both on service and on price. “Not only is it better
service, but it’s less expensive,” says Hagerty. “We’re far and away the
largest, and we can bring economies of scale from an insurance standpoint.” Even
within the niche marketplace there is enough diversity that you should be able
to find the style of customer interaction with which you’re most
comfortable.
Many of these companies offer extras such as flatbed services. “What we
realized is that you play around in old cars and they’re going to break down,”
says Hagerty. His company also provides consultation services for its customers;
you can tap their expertise, for instance, to help design a garage with proper
security and climate-control systems. Since the guys running these specialty
insurers tend to be collectors themselves, they understand what makes an
enthusiast’s life easier. And, because of this, should you need to make a claim,
you will likely find a much more sympathetic ear with a classic insurer than
with your regular insurer. They know that very little in the world of classic
cars is done by the book. “We know that windshields can cost $2,000 or more,”
says Hagerty. His company is among those that do not require competing quotes,
and which let you select the shop that will perform the work. “If you have a
Bugatti, you’re not going to take it to just any shop,” says Parish Heacock’s
Gandy. “We urge the client to take the car to the right place.” With a
regular-use insurer you could find yourself facing a claims representative who
insists that you go to an approved body shop and reminds you that OE parts are
prohibited—never mind that the car in question was built in 1954. “Conventional
carriers don’t understand someone’s charging $64 an hour to fix a Pantera,”
Gandy adds. “Specialty cars require more care.”
There is a word that comes up again and again when discussing insurance with
those in the industry: fun. Defying stereotypes, these insurers seem to consider
having a good time with their clients the most satisfying aspect of their
business. “We know this is a hobby,” says Hagerty. “We deliver great service and
have fun with our customers.” Leland-West’s Bromberg has a similar perspective.
“Everybody has a story,” he says. “It’s my favorite part of being here—the fun
part is getting to talk to these guys.” Though insuring your car with a
specialty insurer makes sense—both on financial and customer service
levels—there is also something reassuring about knowing that these companies are
run by fellow enthusiasts. “Everyone at Parish Heacock has these cars—I’ve got
old Porsches—and we all vintage race,” says Gandy. “We happen to be car guys who
are in the insurance business.”
American Collectors Insurance, 800.360.2277, www.americancollectorsins.com;
Condon
& Skelly, 800.257.9496, www.condonskelly.com;
Grundy
Worldwide, 800.338.4005, www.grundy.com;
Hagerty, 800.922.4050, www.hagerty.com;
J.C. Taylor, 800.345.8290,
www.jctaylor.com;
Leland-West,
800.237.4722, www.lelandwest.com;
Parish Heacock,
800.678.5173, www.parishheacock.com