Insurance for the rest of us

[Zonaman]

INSURANCE FOR THE REST OF US

First, the disclaimer: These are my personal observations. I’m not an insurance expert, nor am I an expert in the field of classic car collecting and restoring. Before securing any type of insurance, you should seek the advice of a qualified insurance professional and/or a qualified attorney. Although reasonable efforts have been made to ensure that electronic and other information in this article is complete, accurate and timely, I do not represent that the information is complete, accurate and timely in all instances. I am not endorsing any particular product, company, or type of policy. I assume no responsibility for the use of the information provided. Unless otherwise noted on an individual document, file, web page or other web site item, I grant permission to copy and distribute the information for noncommercial use, as long as the content remains unaltered. This article limits its discussion of auto insurance to collision coverage (in the U.S.)- the portion of an auto insurance policy that covers the damage to the policyholder’s car from a collision. Wherever possible, I footnoted sources and definitions that were either quoted verbatim or paraphrased. The Word file with all the notes is attached in case you care to look.

Generally speaking, from an insurance standpoint , there are two categories of owners who subscribe to this list. There are some of us who collect and restore Chevrolet/GMC trucks as antiques and collectables. This would include vehicles that are more than 20 years old, that have not been altered from original factory specifications. I would speculate that the majority of us fall into the second category- Those of us who build street rods & custom/modifieds (Rods may be considered pre 1948 and customs, post 1948). Trucks that have been modified from their original design. This includes alterations to the engine, chassis, body style, paint, and/or interior. This article excludes those vehicles whose modifications qualify them to race on a closed track. Furthermore, the insurance industry distinguishes between occasional and everyday use of vehicles.

The vast majority of insurers who cover collector cars restrict their coverage to occasional use only. Hagerty Insurance company’s qualifications are typical:

• Usage. Hagerty covers vehicles that are used on an occasional basis -- e.g. club functions, exhibitions, organized meets, tours and limited pleasure driving.
• Storage. Collector vehicles must be stored in a fully enclosed, locked garage when not in use.
• Driving records. Generally, one or two minor traffic violations or accidents are acceptable. We are not able to insure those who have experienced major infractions such as a DUI, reckless driving or excessive speed violations within the past 3-6 years. All household driving records are subject to review by an underwriter.
• Regular-use vehicles. Each licensed household driver needs to have a regular-use vehicle for daily driving and must maintain regular-use insurance in his or her own name.

There are variations on this theme. For example: Aon Collector Car Insurance will allow unlimited miles. Nevertheless, they are careful to stipulate that there be no business or racing use of the vehicle. Grundy is another company that is generous with mileage but will not insure anything other than a vehicle used for show, pleasure, or hobby purposes. In any case, you will be insuring for an agreed value. That is a policy issued based on a value established by you and agreed to by the insurance company. In the event of a loss, you will be compensated for the cost of repairing or replacing your vehicle up to the agreed value. Some companies, like Aon, offer variations on this in the form of enhanced coverage as well as additional endorsements including a very limited business use provision. Whether you fall into the first category of Chevrolet/GMC truck owner or the second, this sort of coverage may be quite appropriate as well as affordable if you’re not using your vehicle as your primary means of transportation. Now it’s time to talk about insurance for the rest of us.

I’m not a professional mechanic. When I went looking for a truck, I just wanted an old reliable everyday driver; like my father owned. Something I could work on without need of expensive diagnostic equipment or a degree in computer science. Something I could modify to make it safer, more comfortable, faster, or prettier as much or as little as I care to. Or care to learn how to. I’m not a collector either. You won’t see me bidding at Barrett-Jackson anytime soon. I need my truck to get to work, to tow my boat to the lake, and to get everyplace else I need to go. I picked a ’69 C-10 because you could get it and most of the parts for it easily along with the most manufactured engine on Earth- the 350 Chevy. I had no idea that it would appraise for twice what I paid for it! When I went to insure it for what it would cost to replace it I got a rude awakening- It’s called actual cash value- A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation.

As you’ve no doubt deduced by now, your everyday driver is not going to be insured for an agreed value. A typical insurance policy will cover loss to your everyday driver under an actual cash value policy. Usually, this means that in case of a loss the insurance company will send out an adjuster, an individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies. With a reputable company you may expect to be treated fairly by insurance company adjusters however, you are not likely to be favored. Most problems with this type of claim result from a lack of information. Either the insurance company adjuster doesn’t appreciate the true value of the vehicle (and is not motivated to research it) or the owner lacks sufficient documentation to back up his or her assertion that the vehicle is worth more than the insurance company is initially willing to acknowledge.
Your ride might not be worth much more fuss and bother than whatever the adjuster says. If the truck’s only worth a few hundred or perhaps a few thousand- an actual cash value policy with no further expense, research, or documentation maybe all the expense it’s worth. For many of us though, our everyday drivers approach and sometimes exceed the cost of a new vehicle! I purchased my ’69 C-10 in 2004 for $7,000.00. Since I borrowed a portion of the money to pay for it, I wanted to “insure my loan” against a total loss. Most lenders who loan for the express purpose of buying a car or truck will insist upon it. In my case, for a variety of reasons, I secured an equity loan using real estate as collateral. It was in my interest to be sure that I at least had enough insurance to pay back my loan in case the truck was totaled. My next step was to secure an appraisal from a professional appraiser- one recognized by one or more of the following groups: American Society of Appraisers (ASA), International Society of Appraisers (ISA), International Automotive Appraisers Association. Your insurance agent or attorney can recommend one. I was flabbergasted to learn the “old pickup,” with the new crate engine, that still needed lots of work, was worth more than twice what I had paid for it! I also now possessed the paperwork and photos to help me establish, with some measure of credibility, what it might cost to replace the truck with a similar one.
It was then that my insurance agent explained to me that an agreed value policy was out of the question, given the conditions under which I planned to use the truck. Instead, we went with a stated value polciy This form of policy is frequently and easily misunderstood.
It is often used on collector car policies. Most insurance agents typically represent it as being the same as "Agreed Amount." It is not! The "Stated Amount" form states the insurance company will pay the lesser of:

1. The Stated Amount or
2. The cost to repair the covered auto not to exceed the "Stated Amount" or
3. The "Actual Cash Value"

Its value is that it establishes a starting point for what your ride is worth. Keep in mind that a new car will depreciate dramatically during its first year off the lot. Likewise, under a stated value policy, an adjuster will apply depreciation to your everyday driver. So if you stated your vehicle was worth $15,000.00 at the time it was appraised and you total it one year later. You may expect less than that because of depreciation. By now you’re thinking, “Yeah but I keep my ride in impeccable shape!” On top of that you may have just slapped on that Old Air air conditioning system and a 700r4 tranny adding about $5000.00 in value to that old truck of yours! You know that if you had to go out on the open market and replace it you’re looking at twenty grand! Keeping in mind that there’s no agreed value policy for you; what can the everyday driver owner do?

The short answer may not sound very satisfying but the truth is: In the event that you total your everyday driver, which also just so happens to be a classic truck, you will most likely not receive what it is worth. However, neither will the new car owner who just drove off the lot. The real question is- How do I get as close as possible to what this vehicle is worth from an insurance policy in case it’s totaled? This became an especially important question for me when the unthinkable occurred- I smacked my ride into the medium on a local freeway (See: Zonaman Augers One In!) At the time I thought I’d had a stated value policy. I wasn’t until I called my independent insurance agent (I had switched agents an polices from my original plan) that he reminded me I had, under his advice, changed from a stated value to an actual cash value policy. That meant there was no stated baseline for a value on my truck! Had I done nothing prior to the accident to establish a value on the vehicle, I might have been in trouble. As it turns out- it was the right thing for me. I’ll explain:
At the time of the accident, my appraisal was eighteen months old. After the accident, I resolved never to have an appraisal that was more than a year old. At the time of this writing, one performed by a professional costs around $150.00. (in Arizona anyway) I look at it as the cost of insurance- If your vehicle is anywhere near 5 digits in value, it’s worth it. At some point, on the cost of repair continuum, the truck would be pronounced a total loss by the adjuster -The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property. With my appraisal, I felt I could reasonably assert the truck was worth $15,000.00, eighteen months prior. Additionally, I had added a new air conditioner and a new 700r4 transmission less than a year ago. I had the receipts. I installed the a/c myself but the tranny was professionally installed so- so much the better. In fact, I kept receipts for every last little thing I did including a log on maintenance. I felt confident that the truck was arguably worth what it had appraised for even with depreciation. Here’s where it gets good. I need authoritative documentation showing I wasn’t the only guy in the universe that was saying this. So I turned to the sources that an appraiser or an adjuster might use:

• A copy of the 2005 Standard Guide to Cars & Prices, 17thed., indicating a value of $14,000.00 for a 2.0 vehicle. They have a 1-6 rating system where 1 is a “show car” and 6 is pretty much a parts donor. My appraisal showed my truck to be 2.0- “fine” according to this reference.
• A print copy of the Kelly Blue Book Early Model Car Guide, v.79, number 8, July-December, 2005, indicating an “excellent” value $11,770.00.
• A copy of the January –April, 2004 edition of the N.A.D.A. Classic, Collectable, and Special Interest Car Appraisal Guide indicating an just “average” value of $9,600.00. and “excellent” was closer to $20,000.00. My truck was above average (according to the appraisal).
• A copy of the online N.A.D.A online version (http://www.nadaguides.com/gen/select...wPr=1^wPg=2081) indicating an “average” value of $16,695.00 on November 9, 2005. This is significant because a quote from the online version requires a zip code and it’s more current than the 2004 N.A.D.A. This suggests that the value of the vehicle may be increasing either due to local market conditions, appreciation over time, or both.
• Ads from CollectorCarTraderOnline.com. featuring several 1969 Chevrolet C-10’s in similar condition to mine. These all ranged from ten to twenty thousand dollars.

These sources are readily available from your local public library and/or the Internet. (Be sure to consult the latest editions.) I could now authoritatively assert that my truck was worth $10,000.00 under the most conservative estimate; it was certainly reasonable to say it was worth what it had appraised for; a claim it was increasing in value could also be documented. I might have been in a better position than having the stated value policy in that I could possibly get more than it originally in order to compensate me for it’s actual cash value. Had I a newer appraisal confirming this, I’m pretty sure this would have been the case. So what happened?

In my case the truck was not totaled. The insurance company paid for $7,000.00 (Ironically, what I paid for it) in damages to the truck without more than a whimper. My loan was safe. I was not making payments on something with nothing of value to show for it except some low-ball settlement from the insurance company that wouldn’t even cover a payoff. Here’s why: First, I did my homework (At least after I bought the vehicle). I learned what my vehicle might actually be worth- which is often different than what we think or may wish it was worth. When I did have a loss, I was armed with knowledge and documentation. I had the opinion of a recognized professional in my hand and knew where to go to find the latest values for my vehicle from authoritative sources. If the insurance company was going to throw me a curve, I’d know it. As it turns out they didn’t.

Remember the old axiom about catching more flies with honey. I believe that, contrary to what many believe, reputable insurance companies aren’t out to “rip us off.” To be certain they’re in business to make money for themselves and there shareholders. They want to minimize losses not only to do this but to keep rates competitive. The claims handlers do not arrive at work each day with marching orders to “screw one and all.” To begin with, I let them know right up front, what sort of vehicle I had and what my expectations were. My agent and I sent them a copy of the appraisal and photos of the truck when I took out the policy. I politely reminded them of this when I filed the claim. I researched body shops that had good reputations and made a list of the ones I liked. I then compared this to the list of recommended shops from my insurance company and chose one of those that appeared on both out lists. This meant we were dealing with people we both trusted. I also got a $100.00 break on my deductible by going with one of them. I think this went a long way in making the insurance company cognizant of the fact that my position on the value of my truck was reasonable and so was I. They also knew that within the range of what they might offer as a settlement, I was by no means ignorant of the true market value of what I had. Had there been a dispute on the settlement they offered, I was also prepared to politely and calmly let them know I wished them to reconsider their offer in light of the information I had. The value of my property was such that, if need be, I was prepared to go into arbitration - a procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.

Once again I can’t stress enough that each individual has a unique situation. You should only purchase an insurance policy after getting the advice of an insurance professional and/or attoreny you trust. In addition there are a number of resources you can go to in order to make smart insurance decisions. For example, in the state of Arizona, where I live, you can visit the Arizona Department of Insurance, (http://www.id.state.az.us/). There you can look up information on insurance companies and agents, compare rates, look up customer satisfaction surveys, and more. Most states have similar web sites. You may also want to look into the Insurance Information Institute (http://www.iii.org/media/about/) a site dedicated to improving public understanding of insurance. One thing is certain: They’re not making anymore of these trucks. The simple law of supply and demand indicates that the well maintained specimens are becoming more valuable. So how much work are you going to do to be sure your insurance needs are met? In the words of Clint Eastwood- "Do you feel lucky punk? Well, do you?'"