Classic cars: What you need to know about insurance – Part 1
First off when it comes to insuring a classic car make sure you understand the difference between actual cash value and replacement cost value. You must realize that when you insure a classic auto that the insurance company will want to know how many miles a year the auto is driven, where it is stored at, is it used in parades or for pleasure rides. They will want to know the value of replacement cost of your classic auto not its actual cash value. Let me explain.
Example one: You have your classic car insured using the actual cash value of a 1976 Mercury Cougar XR7. You are in an accident where the auto is damaged. You turn in a claim to your insurance company and get the shock of your life. You are expecting the value of the car to be high because of the all the restoring costs that you had put into the car right. Wrong, the car was insured at actual cash value (present market value) and now depreciation will be factored in and the car will probably be considered totaled. You are out your investment.
Example two: You have the same car insured using replacement cost values and the same accident occurs to this car. You turn in a claim to your insurance company but this time the cost of the car is covered to what it would cost you to replace the car in the same condition it was before the accident not at present market value.
Insurance companies exist that specialize in insuring classic autos and the premiums usually include an attractive package for classic car owners to help you protect your investment.
Tags: Mercury