If you’re a “car person,” buying and owning a classic or customized car might be a dream come true. What may seem not-so-dreamy is getting insurance for that car. The fact is, the value of such vehicles may be much harder to pin down than the value of the “daily driver” you rely on to get back and forth to work or shuttle the kids to their activities. And that can complicate matters when it comes to insurance.
The good news? Agreed value and stated value insurance are designed for your situation. Owners of hard-to-value cars rely on these types of insurance policies to protect their investment, and to do so affordably.
How standard car insurance works
To understand agreed value and stated value car insurance, it's important first to understand how a standard policy values your car when you have a comprehensive or collision claim. These coverages protect you financially if your vehicle is stolen, damaged by severe weather, or damaged in an accident for which you’re at fault.
If such an incident occurs, the insurance company will declare your car a total loss if the cost to repair the damage exceeds the car’s value. The company will then pay you a total loss settlement based on the vehicle's actual cash value (ACV). ACV considers the car’s depreciation and other factors. The payment may thus be far lower than the car's market value or the cost of replacing it with a new model.
However, because classic and custom car values tend to fluctuate, it can be difficult to get actual cash value insurance. That’s where agreed value and stated value insurance are options.
What is agreed value insurance?
At first glance, an agreed value policy looks a lot like a standard car insurance policy. You still get liability coverage (mandatory in most states) and can protect yourself financially with comprehensive and collision coverages. You may be able to add roadside assistance. Unlike a standard policy, you might be able to add coverage for items such as tools and classic automobilia related to your car.
The big difference, however, is that you and your insurance company agree on a dollar-figure value of the car using a professional appraisal. Once issued, any comprehensive or collision claim payouts will be based on that agreed value.
The insurance company will require the appraisal before coverage goes into effect. Considering the way values fluctuate for some classic cars, your insurer might need you to have the vehicle reappraised periodically.
What is stated value insurance?
Another option for classic and custom cars is stated value insurance. This type of policy insures the vehicle for an amount that you specify, usually well below the car’s market or appraised value. Then, if the car is declared a total loss, the insurance company will pay the claim based either on the stated value amount or the ACV, whichever is lower.
So why might you want stated value insurance? It’s to help save money. Stated value may make sense for an extremely high-value car that would have an unaffordable insurance premium if insured for its appraised value.
For example, imagine someone inherits their grandfather’s 1963 Corvette Stingray Coupe, appraised at $200,000. An agreed value policy based on that appraisal might cost $200 or more per month in premium. Perhaps that’s more than the owner can afford. So they might opt to get a policy based on a stated value of $50,000. This would provide a more affordable premium, with the tradeoff that any total loss payout would never be more than $50,000. If the owner practices their own risk management by storing Grandpa’s ‘Vette in a private garage and rarely driving it (which is often the case for such high-value vehicles), then that tradeoff might be worthwhile.
Agreed value versus stated value insurance
To simplify, here’s a breakdown of the pros and cons of agreed value and stated value insurance.
ProsInsurance payout based on the full value of the vehicle
ConsInsurance payout based either on the stated value of the vehicle or its actual cash value, whichever is lower
What companies offer agreed value and stated value insurance?
Not all major car insurance companies offer agreed and stated value insurance, but some do. Allstate, State Farm, and Progressive all offer options for classic cars. Another company, Hagerty, specializes in insurance for classic cars — it refers to its agreed value insurance as “Guaranteed Value.”
Whenever you have a complex insurance need, it’s a good idea to chat with an agent or broker. These professionals are trained consultants who typically represent multiple insurance companies. They can evaluate your needs and determine which kind of policy — standard, agreed value, or stated value — is suitable for you.
Get the coverage you need for your special car
Let’s face it. When you're cruising down the road or showing your classic or custom car, insurance is the last thing you want to stress about. With agreed value and stated value insurance, you can get the coverage you need and enjoy your special “set of wheels” without worry.