When to Insure a Collector Car Like a Fine Work of Art
This post is part of a series sponsored by Cincinnati Insurance Company.
Collectible cars are unique to each owner and the insurance coverage should be too. At The Cincinnati Insurance Companies, the coverage is tailored to meet the needs of your client. Whether an agent is seeking to insure a 1970s Mustang or a collection of 20 luxury, limited edition, high-performing autos, Cincinnati Insurance offers the coverage you’re looking for.
To learn more about the important elements of this coverage, Insurance Journal’s Pam Simpson sat down with Cincinnati’s Matthew Cluxton, Director Private Collections, and Michael Salerno, Product Manager Personal Lines, to talk about the differences between their Inland Marine Capstone Collector Car coverage and their personal auto coverage for collector and exhibition cars. Together they describe the nuances of coverage for your client’s prized possession.
How would you define a collector car?
Matt: Our definition is broad because we understand that people collect cars based on their tastes, desires and preferences for unique experiences. In the simplest of terms, a collector car or motorcycle is unique or rare in design. It’s a limited production vehicle or has limited availability, and overall is generally recognized for its aesthetic value. In addition, generally, collector cars are driven with far less frequency than our standard use cars. Finally, collector and exhibition autos do not depreciate over time, but in fact, most often appreciate in value. As such, a collector car is truly a collector’s item.
Given this broad definition, can you explain how Cincinnati Insurance tailors coverage to meet collectors’ needs?
Matt: For collectors of autos with values of $500,000 or more, we offer the Capstone Collector coverage under our Inland Marine policy. This can be a single car of this value, or a collection of cars. We have some collections worth several million dollars covered under this type of policy, which we also use to cover art collections and other highly valued assets. We developed this product to meet the needs and characteristics of these types of collections and the pricing reflects that. For example, the more cars in the collection, the bigger the credit the policyholder will receive. We will also give credit for specialized garaging and infrequent driving. The pricing on the coverage, although it reflects the high value of these cars, is generally lower than it would be using a traditional auto policy.
For collector cars valued at less than $500,000 we offer coverage under our traditional, personal auto policy, for convenience of the collector to bundle with their standard autos.
Can you share how Cincinnati works with collectors to determine the value to be insured?
Matt: We work with the insured to agree on the value of the asset, using an independent third-party, a bill of sale or appraisal. This differs from the stated value, which reflects the actual cash value of an asset at a period in time. Collectors prefer the peace of mind of knowing that they will receive the exact value they place on their auto at the time they insure it, rather than the cash value at the time of a claim, especially if there is a total loss.
As collectibles often appreciate, how do you address appreciation when insuring a collectible car and how does this effect the agreed value?
Mike: For those collectible autos that are insured as an extension to a personal auto policy, we’d set an agreed value, and make adjustments for appreciation upon renewal. However, with the Capstone Collector coverage, we provide coverage for up to 150% of the agreed amount in the event that the market dictates that the car is actually worth more than what we’re insuring it for.
For example, if a car that is part of a collection written on the Capstone Collector policy is insured for a $100,000 and it’s discovered that it is actually worth $150,000 at the time of a loss, we would pay $150,000 out on that loss to the insured. It’s a great benefit to policyholders with appreciating assets, as the collector may not always be aware of market fluctuations to adjust their coverage.
Are there other differences between Capstone Collector coverage and traditional auto coverage agents should be aware of?
Mike: An important distinction between your personal auto policy and a collector policy is that with a collector policy Cincinnati will cover diminishing value. If the policyholder gets into an accident, the collector car may no longer be considered mint condition and that loss of value is not covered by typical auto policies. Our Capstone Collector coverage steps in and fully indemnifies our insured for that loss of value.
Does Cincinnati have a collector car specialist on the team who assists with your underwriting?
Matt: All of our underwriters are trained to underwrite collectible autos and both Mike and I are always available to assist with these submissions as well. We are very fortunate to have auto enthusiast and experienced mechanic, Jon Winstel as our Personal Lines department collector auto liaison and valuation specialist. Underwriters are also supported by our continuous market research to ensure that agreed values are in line with the market today.
Does Cincinnati restrict the mileage usage on a collector car?
Matt: For our Capstone Collector coverage, there is no mileage restriction on the policy. In the language itself we just state “infrequent use,” which is broad, but offers flexibility for the insured. It’s understood that these types of collector cars are not being driven on a frequent basis.
Mike: Similarly, on the personal auto coverage policies, there is no mileage restriction on the collectible auto, but in all cases, our underwriters are making sure that these are truly excess vehicles and no driver in the household would rely upon the collector auto for regular driving needs.
In the event of an accident, what is the coverage for restoration, repair, or even spare parts?
Mike: The Capstone Collector policy recognizes that some repairs, while making the car usable again, don’t return the car to its previous market value. Again, that’s the value of the diminished value coverage, which would provide financial reimbursement to the insured for the lost value. We also cover spare parts up to $10,000 in the event of accidental damage.
On the personal auto side, we offered the normal repair costs we would for your standard car. For spare parts we also offer an additional $1,000.
What type of coverage is made available for newly purchased additions to an insured’s collection?
Matt: With the Capstone Collector coverage, we provide full purchase price coverage for up to 90 days after acquisition. This offers convenience to collectors purchasing abroad with lengthy shipping deliveries, as well as weekend purchases when agent offices are not open.
Mike: Under the personal auto policy, a collector has coverage for 15 days, and it’s going to align with coverage on the other personal vehicles for comp and collision. If the collector wanted diminishing value coverage on the collectible, it would be important to speak with an agent as soon as possible.
Are there any other services that you provide to policyholders?
Mike: Roadside assistance is available with all of our auto policies. With the Capstone Collector endorsement, its available up to 125 miles from garaging and is available 24/7. We offer our policyholders an Uber-like app to make immediate contact with our service, providing peace of mind as they monitor the progress of assistance on its route. If an insured prefers to call their own tow company, we offer up to $350 reimbursement on towing costs.
For agents seeking coverage for collectibles, how would you describe the Cincinnati experience?
Matt: We are truly a one-stop shop. While we write these collectible auto policies on a mono-line basis, meaning they don’t need to be packaged with other coverage, they can be bundled with the full array of coverages we offer for homes, autos and collectibles. We’ve seen many opportunities for agents to expand their relationship with a client beyond insuring the collector car, by offering the additional coverages we have available. This is not possible when seeking this coverage with a specialty carrier.
Working with the experienced team at Cincinnati, we help you choose the best coverage to meet your client’s needs – based on the collecting they like to do!
Takeaways for insurance agents and car collectors:
Collector car coverage is not a cookie cutter coverage and should be tailored to the unique characteristics of the collector auto. It is critical to the collector’s peace of mind and adequacy of coverage that the policy be written based upon agreed value, with a recognition for appreciation and include coverage for diminishing value.
Becoming familiar with your client’s collection can offer a great opportunity to engage with the client around lifestyle, home and other items of value that require coverage. Working with Cincinnati, those coverages are all available through one contact for ease of underwriting and service.
Matthew Cluxton is Director of Private Collections at The Cincinnati Insurance Companies. Prior to joining Cincinnati in 2016, Matthew spent 9 years with AXA Art Insurance, now part of AXA XL, where he oversaw underwriting and business development of specialty fine arts and collectibles. Matthew Cluxton on LinkedIn
Michael Salerno is Product Manager of Personal Lines at The Cincinnati Insurance Companies. An experienced actuary and product manager, Michael has been with the company for 5 years, as a lead in product development and pricing for personal auto umbrella and auto. Prior to joining Cincinnati, Michael was an actuary with Liberty Mutual. Michael Salerno on LinkedIn