One of my all-time favorite vehicles is the 1974 to 1976 Toyota Land Cruiser. It technically was a four-passenger vehicle although the rear seats folded down from the sides and faced the middle. It had two doors, funky curved windows in the back corners, nice ground clearance, and a very utilitarian design. I thought they were very cool, but it wasn’t very pretty. A friend of mine recently bought one and is restoring it, so I thought this would be a good time to discuss car insurance for classic cars.
Classic car insurance in many ways is no different from car insurance for a Ford Taurus, Chevy Impala, or other current model vehicle. It has liability coverage and optional coverage for uninsured motorist, personal injury protection or medical coverage, and roadside assistance, as well as, comprehensive and collision deductibles. It is, however, very different in one key area. Instead of being written on an actual cash value basis, the policy can be written based on the vehicle’s stated value.
Car insurance policies for current model cars, trucks, and SUVs are written on a depreciated or actual cash value basis. This means if your 2015 Honda Acord is totaled, the claim will be paid on its depreciated value. The depreciated value is determined roughly by subtracting 2 years of depreciation (2017 to 2015), approximately 15% to 25% per year, from the original cost of the Acord. Other factors included in determining the depreciation are mileage and condition. Spots, stains, upholstery rips, dings, dents, and scratches will contribute to a lower value.
Based on the above factors, our 2015 Acord which cost $28,000 new may be depreciated $8,400 or more depending on the rate of depreciation and its overall condition. Receiving a check for $19,600 would be quite disappointing and may cause financial hardship if you owe more than that. Imagine how you’d feel if you paid $15,000 or more for a 1976 Land Cruiser or another classic car and it was totaled. The depreciated value of most classic cars may be only hundreds of dollars instead of the thousands they cost to buy.
Classic cars may be worth more now than they were when purchased new or may be rising in value. They are more of an investment than your daily ride and may be insured on a stated value basis. The stated value is dependent on its purchase price and / or stage of restoration. In the case of my friend’s Land Cruiser, its current value is between $15,000 and $17,500 since it’s about 50% restored. Once the restoration is complete, it will be worth about $35,000.
The policy I wrote for him covers it at its current value. We’ll talk every six months to see how far along he is in the restoration cycle and adjust the value accordingly. Being insured for its stated value means if it were to be totaled in an accident, his claim would be paid on the insured value of the vehicle rather than its depreciated value and that’s much better coverage! By the way, the cost for such a policy is much less than what I’m paying for my Toyota Camry.
What do you think? Share your comments, questions, or experiences with me on my Facebook, LinkedIn, and Google + pages. I’d love to hear from you.