It might seem strange, but we're about to spend the next several pages encouraging you to spend your money on something we hope you'll never use. Just like a fire extinguisher or bandages, automotive insurance is one of those things you would prefer to never need. And just like brakes or oil, you're nuts if you're driving your car without it.
We've read and written a bunch of hot rod insurance articles over the years, going back to the days when insuring any kind of specialty vehicle was a big hassle and trying not to violate the terms of your policy was an even bigger challenge. Luckily, things have changed for the better. There are now many insurance companies providing coverage to collector cars exclusively, and the rules regarding coverage, claims, and usage have become a lot more hot rodder friendly. In these days, when it is becoming increasingly more difficult to build, paint, register, and drive a hot rod or other specialty vehicle, it's nice to know that our insurance companies are on our side.
Finding the Right Company
Finding a specialty car insurance company is easy. There are lots of them. Some, and only some, are listed in the source box at the end of this article. Many more can be found in vendor booths at car shows, advertising in magazines, and on the Internet. Finding the insurance company with the best policies for your car and your habits is easy too-just a little more work. Start by asking your fellow rodders or trusted builders for recommendations (or warnings). Then start checking websites or making phone calls to gather information from as many companies as you can. Tell them about your car and ask them about what kind of coverage they offer, how they handle claims, premium rates, vehicle usage policies, and any specific issues that might pertain to your vehicle. Each company has its own rules, its own definitions, and categories for the many diverse types of collector cars, not to mention its own types of policies and programs. In addition, insurance is regulated by states, and all 50 of them have different laws regarding it.
In recent years, more standard automobile insurance companies have started dabbling in the specialty car market, and we've been impressed by some of them. We're glad to see companies supporting our hobby, especially since many of these companies have good, time-honored reputations. Even so, there are advantages to insuring with a company that specializes in collector cars. Specialty companies deal exclusively with specialty cars and tend to have a better understanding of the hot rod hobby, the value of the cars, and the habits of the people who build, own, and drive them. Best of all, specialty car insurance companies typically offer lower premiums than standard companies. If you are ensuring your specialty vehicle with a standard insurance company, definitely avoid the temptation to simply add your hot rod to the policy you already have on your ordinary cars. Specialty cars should be insured with an "agreed value" policy. What that is and why you need that for your hot rod will be described a few paragraphs from now.
We took our own excellent advice and called several different specialty insurance companies to get a general idea of their policies. We also asked them for their excellent advice for enthusiasts-and their opinions about common mistakes made by hobbyists.
Translating into Hot Rod
You may have noticed we've been using the term "specialty car" in this story, as opposed to "hot rod" or "street rod." That's because most of the specialty insurance companies we're familiar with have different coverage programs for many different categories of collector cars in addition to hot rods and the classifications, terminology, and definitions for those categories differ from one company to another.
John Jackson's photos were...
John Jackson's photos were taken after the fire that destroyed Jason Graham Hot Rods & Cool Customs in Portland, Tennessee, in February of this year. Since then, Graham has begun the process of rebuilding his shop and working with his customers. One of the cars damaged, a '30 Ford coupe, was rebuilt in time for the Goodguys Nashville Nationals where it received a STREET RODDER Top 100 award (and not out of sympathy either). You can see a photo of the coupe on page 48 in our Nashville Nats coverage.
For example, the CHROME/ANPAC website lists six categories (for which CHROME is an acronym). They are Classic (including antiques and modern classics), Hot Rod (for modified pre-'49 cars), Replica or Kit Car, Original (un-restored cars), Modified or Custom (for modified post-'49 cars), and Exotic (including rare, one-off, limited production vehicles valued in excess of $100,000).
J.C. Taylor has slightly different categories: Antique (original vehicles 19 years and older), Street Rod (modified pre-'49), Customized/Modified (modified post-'49, 20 years or older), Replicar (commercially assembled reproduction of a vehicle at least 25 years old), Kit Car (buyer-assembled vehicle at least 25 years old assembled by the buyer from separately manufactured components), and Exotic (a vehicle that because of its specific make, model year, and condition is considered to be increasing in value).
You get the idea. The point is to make sure your insurance company knows where your car (most likely a street rod since you're reading STREET RODDER) fits according to their terminology so that it is covered properly. And we don't have to tell you that misrepresenting your car in any way is going to backfire on you, should you ever have to file a claim.
Getting the Right Policy
There are three basic types of automotive insurance coverage and three basic types of policies. The three types of coverage are liability, collision, and comprehensive. Liability protects you in case you are in an accident and are found to be at fault. Collision covers repairs to any damage to your car in the event of an accident. Comprehensive covers virtually everything not covered by liability and collision, such as theft, vandalism, and accidental damage, including damage while at a shop.
Which forms of insurance you want, and how much coverage you want can be determined between you and the insurance company. Some companies require customers to carry comprehensive, and these are by far the most common claims filed. If you drive the car, liability insurance may be required by the state you live in. If the car is inoperable or displayed behind velvet ropes in your personal museum, you might be able to forego liability and collision.
The three types of policies, which will determine how much money you'll receive in the event of a total loss, are "actual cash value," "stated value," and "agreed value." The first type, actual cash value, is probably how you insure your ordinary cars and trucks. In the event of a total loss (accident or theft), the insurance company will pay the cost of replacing that car minus depreciation.
Stated value policies were popular when specialty car insurance was something new. This type of policy is still frequently confused with agreed value policies. With a stated value policy, the insurance company will pay up to the value of the car stated in your policy (but not necessarily the full amount) or the cost to repair the car or the current market value of the car, whichever is lowest.
Street rodders and other specialty car owners should choose an agreed value policy for their cars. With this type of policy, the car owner and insurance company have agreed upon a value. In the event of an accident your insurer will pay the full cost of repairing the car up to that agreed dollar value (minus any deductible if applicable); in the event of a loss, the insurance company will pay you the entire agreed upon dollar amount.
We asked several different companies how agreed values were agreed upon between the customer and the company. Typically, it's a simple process. You, the customer, provide a thorough description of the vehicle along with photographs and your declared value. If your value is reasonable, the company writes your policy.
Whether at home or at a pro...
Whether at home or at a pro builder's shop, it's more than likely that your disassembled in-progress project would be in pieces all over the place. Keep a list of all the components so that everything can be insured.
Some companies require an outside appraisal, some don't, and some require an appraisal only on cars valued above a certain dollar amount (or if the amount provided by the customer doesn't seem to match the description and photos provided). We'll get into the subject of appraisals more thoroughly next month.
It's in your best interest to provide an accurate honest dollar value. Agents who work with specialty car companies are enthusiasts and are familiar with the high-dollar values of many street rods-but they'll also know if you're valuing your homebuilt backyard project like it's a Ridler winner. They recommend determining a dollar value based on the current market value-what you could reasonably expect to sell your car for-which in many cases is less than the actual cost of a professional build. But don't make the opposite mistake of low-balling the value to save a few bucks on your premium. You'll end up cheating yourself if your car gets totaled or stolen. Laura Bergan at American Collectors Insurance says that most of their customers have a very accurate idea of their car's value. "If we feel if it's off the mark a little bit, we'll give you a call to find out why you think the value is what you applied for."
All of the insurance representatives that we spoke to recommended re-evaluating your coverage on a regular basis. If the car is under construction or if improvements have been made to a finished car (new paint or upholstery, for example), call or email the insurance company to adjust the coverage based on those changes. Bergan told us that American Collectors automatically increases the agreed value by $500 every renewal. The company also offers an "inflation guard" for agreed value policies, which increases the value 2 percent every quarter.
Early and Often
"Some people are under the impression that you can't obtain insurance while the car's in progress," Bergan told us. "If it's not registered, we'll provide comprehensive for whatever value it has while it's under construction. Then when it's registered and ready for the road, we can add liability and collision."
Paul Jakubowski says that J.C. Taylor provides the similar coverage for projects and he encouraged car owners to remember to upgrade their insurance as improvements are made during the build. After it's finished, continue to re-assess its value as more upgrades are made.
If the car is going back into a shop for an extended period of time, you may want to consider dropping liability and collision and keeping comprehensive until it is back on the road, when you can re-add that coverage.
Some of the companies we spoke to provide coverage for existing customers who happen to buy a car somewhere, while they're towing it home. For example, if you bought a car at a swap meet or found one in the classifieds and had to move fast on it, your insurance provider might have your back. Not all companies provide this, so find out first. And remember to alert the insurance company of the new purchase as soon as possible.
What About Homeowner's Insurance?
Every insurance company representative we spoke to pointed out the misconception held by many car owners that their cars are protected by their homeowner's insurance. That is almost always not true. Even though the majority of claims involve accidents occurring at home, your homeowner's policy probably does not cover your car, whether the car is finished and parked in the garage or under construction in pieces in boxes. Maybe your situation is the exception to the rule, so check with your agent and get it in writing, but in most cases, cars and parts are not covered.
Getting Better all the Time
Thirty years ago, everyone had crazy stories about the friction between hot rodders and their insurance companies. Few auto insurance companies would even consider covering specialty cars, and agents were sometimes clueless about the value of hot rods or the habits of hot rodders.
Many specialty insurance companies...
Many specialty insurance companies have extended their services beyond destruction, damage, or loss. Roadside assistance is now available from some companies-maybe even your insurance company. Give them a call to find out, and re-evaluate your coverage while you're at it.
When specialty insurance started becoming more prevalent, things started looking up, but stories continued about strict limitations on how car owners could use their specialty cars. Mileage limits were agonizingly low, and driving your pride and joy to work or to the hardware store meant potentially violating the terms of your policy.
Restrictions still exist of course-they are the reason companies can provide relatively low-cost, agreed-value insurance on high-dollar cars-but restrictions such as mileage limits and usage have loosened up. Some companies offer unlimited mileage, but only under specific recreational uses, such as driving to car shows or local cruising. Some companies allow more types of use but maintain annual mileage limits.
"The nature of the hobby is always evolving and people want less restrictions," Bergan says. "People don't want to be told when and how to use their cars. American Collectors has various options available so customers can pick the policy best suited to the way they use their car." Options include a feature called "freedom tier" that allows customers to drive their cars for some general use-which was off limits at one time.
Mandy Ebert told us about similar changes at CHROME/ANPAC, which has a mileage allowance of 10,000 miles per year with no restrictions. They do require that the customer own another primary-use vehicle, but they allow occasional normal use for the specialty car, such as a trip to work now and then.
CHROME/ANPAC also offers a category called Modern Classics, which covers current limited-edition specialty vehicles like the new Chevy Camaro, which some enthusiasts are buying as collectibles. For cars in progress, the company has increased its "spare parts coverage," to protect up to $1,000 worth of parts that a car owner might have in the shop ready to install-or even parts waiting to be used someday down the road.
Heacock Classic Collector Car Insurance offers free 24-hour roadside assistance and towing services for its customer as part of the Heacock Classic Drivers Club Roadside Assistance Plan. Hagerty also offers roadside assistance service at several levels for annual fees. Check with your agent about similar programs from your company.
Getting the Rat Policy
Even so-called rat rods are beginning to shake off some of the resistance they've traditionally received from insurance companies, as more specialty insurers are looking at this growing segment of the hot rod hobby. "We're chartering un-navigated waters with these cars," Pete Doriguzzi from Heacock says. "We're on the cusp of that right now as we see more of those cars come through." Doriguzzi agrees that many of these cars are well built and safe, despite their outer impression. Even so, the patina'd distressed style that has become popular in the last few years presents challenges when underwriting comprehensive insurance policies. How do you assess accidental damage on a car that was built with intentional aesthetic flaws as part of its charm?
In addition, many of these cars are driven much more frequently than the majority of street rods. We know rodders for whom their hot rod is their primary vehicle. If that's you, a stated value policy or actual cash value policy might be your only option. These policies are not as advantageous as an agreed value policy, but at least you'll have some protection and will be legal if your state has liability requirements. That may change someday. Heacock and others seem eager to deal with the challenges of a changing hobby. It'll be interesting to see what they come up with.
Worst Case Scenarios
On February 21, Jason Graham, owner of Hot Rods & Cool Customs in Portland, Tennessee, experienced a builder's worst nightmare when a fire destroyed his shop and nine cars. Each of his customers experienced a rodder's worst nightmare when they got the call from Graham telling them that their car had been damaged or destroyed.
Graham's building and property was covered by his business insurance, but the customer cars in the shop were not. Many hot rodders neglect to insure their project cars while they are in-progress or assume that the cars are covered by a shop's insurance. Just as with homeowner's insurance, the insurance held by the shop working on your car may not include coverage on your vehicle. If anything could be considered lucky for Graham, it's that the rodding community is made up of decent people and many of his customers have been very understanding, despite their own personal losses.
A similar accident happened at Bobby Alloway's shop in Louisville, Tennessee, in 1998. Lightning caused a fire that wiped out his shop and destroyed 14 project cars. "I used to tell my customers 'If you don't have insurance on your car and something happens, I'm going to call you up and we'll just have to cry together.' When I actually had to do that, it was the hardest thing to do. Most of those customers were friends and they understood.
"Some of the customers didn't have insurance. Some had their cars insured for agreed value with American National. As soon as the insurance company found out about the fire, those car owners had a full check within days with no issues whatsoever. We've built back or replaced most of those cars. Now I have as much insurance as I can possibly buy, but you can't possibly buy enough. We could cover something, but not nearly what the cars are worth." In Part 2 of this story, we'll look a little closer at insurance for shops.
Preparing for the Worst
We asked Graham for some advice to rodders with cars being built in a shop. He emphasized that the builder/owner relationship is built on trust and often on friendship, but that each person also has responsibility for his property. Before a project begins, customers should talk to the builder to make sure each understands the expectations of the other. The builder should keep detailed records of all the work done on the cars. Plans change in the middle of many projects and trying to remember what was done or not done to a shop full of cars is very difficult after an event like a fire. Make sure everything is documented and have a contract written and signed.
Jakubowski at J.C. Taylor suggest that if you are looking for a shop, either for a project build or for repairs, ask other rodders for recommendations. When visiting an unfamiliar shop, don't be reluctant to ask about its insurance or to ask to see an up-to-date certificate of liability insurance. It might be an awkward thing to do in a hobby based on friendship, trust, and handshakes, but when the hobby is also a business, it's important to get things in writing. It's especially important in the event of having to file a claim with an insurance company-and Jakubowski has received a few calls from car owners who had cars in shops that went out of business.
That brings up the importance of dropping by the shop and checking on your car on a regular basis. It's hard to imagine a hot rod owner not doing this, but Jakubowski remembers one customer who had a car under construction and hadn't visited the shop in more than a year. When he finally did, the place was locked up, dark, and empty. Everything-including his car-was gone. This kind of thing only happens rarely, but if it happens to you, once is enough.
Doriguzzi at Heacock Classic reminds us that a car might move from shop to shop during the course of a buildup. Even if the primary shop has adequate insurance, a subcontracted shop (such as the paint shop or the upholstery shop) may not. This is another reason why it's smart to be covered during the build. In addition to keeping your insurance company up to date on the value of the vehicle, keep them informed about where your car is being built, and where it will be going. Keep an inventory of the parts and pieces you own that are at a pro shop or your own shop-not just the car itself, but the engine on a stand, the front end over in a corner, the various parts in boxes, you name it.
Dealing with Claims
Like we said at the beginning of this article, we hope you never have to actually use the insurance we're telling you to buy. The vast majority of rods are never destroyed in shop fires, accidents, or other disasters, never stolen, and never involved in collisions. But in the real world, stuff happens and someday you might have to make that call. We asked our sources about what to do if your project is destroyed in a shop. As with everything else, every company has a little different approach. Some insurance companies recommend starting with the shop's liability coverage first and then filing a claim with your specialty car company. Others recommend going to your own insurance company first and letting them follow up with the shop's insurance if the shop is at fault.
If you follow the first procedure, still make sure to contact your insurance carrier. For one thing, they need to know that the car they are insuring has been damaged or destroyed. For another thing, if you encounter obstacles with the shop's insurance (such as a discrepancy in value or inadequate liability coverage), your own company will be in the loop and prepared to help. Your specialty insurance company might be more familiar with these types of cars than the shop's business insurance provider. These procedures are all things to talk about with your agent when discussing your policy.
In the old days, hot rodders making a claim were sometimes unhappy about insurance companies dictating which shops they could go to for repairs to their damaged vehicles. Those days are over, as most of the companies we interviewed allow their customers to work with the shop of their own choosing. "We have those resources so that we can help people find shops in their area if they don't know where to go, Doriguzzi told us. "Otherwise, we let you go to the shop where you want to have the work done-probably a place that knows you and the car." Jakubowski from J.C. Taylor made the same point. "It's your car. We'll let you take it where you feel comfortable and know you'll be happy."
We hope you'll never have to have your pride and joy repaired or rebuilt after any type of accident, but if you should, the experience will be a lot less painful if your car-and the shop-are covered.
Don't forget to come back next month. In Part 2 of this story, we'll be digging a little deeper into the subject of hot rod shop insurance coverage and we'll also look at the advantages of getting your hot rod appraised by a professional appraiser.