Can you afford Restorer and...
Can you afford Restorer and Builder insurance? If a fire or other catastrophe destroyed your shop and its contents, could you afford to rebuild your business?
Insurance For Shops
One of the topics we talked about last month was insurance at the shop where your street rod is being built, rebuilt, or upgraded. We related a couple stories about rod shops that burned to the ground, destroying the building, the equipment, and the irreplaceable cars inside. In both cases, the shops had business insurance that helped cover the costs, but were unable to fully cover the loss of the projects being built.
Most established shops have business insurance to protect their property and ideally their customers' property, but many insurance companies just don't know what happens inside a hot rod shop and how that's different than what happens inside an automotive repair shop. Bobby Alloway told us that after a fire destroyed his shop in 1998, his business insurance agent had a hard time understanding why a shop would need six or seven sets of wrenches or three welders or specialty tools made by hand.
A Building and Property policy...
A Building and Property policy with Restorer and Builder insurance protects a shop owner's property, including the building, tools, and equipment. A garage keeper's policy protects the customers' cars and parts, including components such as an engine that may be stored in the shop while the car is away being blasted or painted.
Specialty car shops need specialty car insurance just like specialty car owners do. As it turns out, specialty car insurance companies have been responding to the need. Grundy and Hagerty both offer Restorer and Builder insurance customized to the specific needs of specialty vehicle shops and their customers. Both companies offer coverage policies, including general liability, building and property comprehensive, collision for shop vehicles and customer cars, umbrella coverage of vehicles under construction, liability on vehicles once they leave the shop, and more.
Steve Foltz heads up the Business/Commercial Insurance department at Northwest Classic Insurance, an agent for Grundy Worldwide on the West Coast. He explains that specialty companies understand the differences between the classic car industry and the repair industry (such as collision shops): turnover is less, security is generally higher, the cars are of higher value and are appreciating (not depreciating) in value, and the shop crew is likely to be more specialized. And most importantly, the cars are unique; if a highly modified shop-built '32 Ford roadster is damaged in a fire, you can't replace it with another one just like it, as if it were an '05 Ford Festiva.
All of those benefits of a specialty shop, combined with the fact that claims are less frequent than with ordinary shops, means that specialty insurers can provided this type of custom-built coverage cheaper than most mainstream business insurance companies.
Jonathan Klinger at Hagerty reinforced these points and outlined the extensive nature of Restorer and Builder coverage, which might include general liability to cover such events as someone falling and injuring themselves in your shop. Other coverage pays for damage and protects the shop owner when driving the vehicle, such as when going to a paint shop or even attending a car show. Liability also protects the shop after the car leaves the shop, in case something breaks and there is damage or injury. Building and property protects the facility, tools, and equipment in the shop, including specialty tools and the employees' personal tools. And of course, the garage keeper's policy provides agreed value coverage on all the cars in the shop in the event of damage or theft.
We talked to John Heckman, who was hired to set up the Restorer and Builder program at Grundy (the first company to offer it) about their garage keeper's policy, the insurance that covers the customers' cars in a shop. Most standard garage keeper policies, written for repair shops are based on "actual cash value" (the type of insurance you'd have on a "normal" car) which, in the event of a total loss, pays replacement cost minus depreciation. Grundy's policy is based on "agreed value" (the insurance you should have on any specialty car). In the event of a total loss, agreed value policies pay the prescribed amount-no depreciation and no haggling. Individual car owners need to keep their insurance companies up-to-date on their cars; shops don't.