It’s obvious that new cars and older cars have differing needs when it comes to care and maintenance. What’s less obvious is that these cars also have differing requirements when it comes to auto insurance.
If you’re planning on adding an older car to your garage, there are certain things you should keep in mind if you want to get insurance coverage that saves you money and abides by state law.
Older Car vs. Classic Car
Before we dive into the ins and outs of insuring older cars, it’s important to establish the difference between older vehicles and classic cars. All classic cars are older vehicles, but not all older vehicles are classics. Insurance for each of these types of vehicles is handled in its own way. Insurance for an older, non-classic vehicle is based on that car’s depreciated value. With a classic car, insurance is based on the vehicle’s agreed-upon value.
An older car may be a classic in your eyes, but if you want it to qualify for classic car insurance, it needs to meet eligibility requirements set by the insurance company. Requirements may vary from carrier to carrier.
For example, at Hagerty – a company that specializes in classic car insurance – a car has to be a 1979 model or older to qualify for classic car coverage, unless it’s a limited edition, exotic, or supercar. Trucks and SUVs must be 1996 or older. And the insured vehicle can’t be used for daily transportation; all licensed drivers in the household must have daily transportation that’s different from the classic car being insured.
To qualify for classic car coverage at Geico, a vehicle must be at least 25 years old; a newer car may be eligible if it’s considered to be a limited-production model or one with a unique design that’s appreciating in value. To be eligible for Geico’s classic car insurance, a vehicle can’t be used as primary transportation; it must be used only for exhibitions, club activities and the occasional leisure activities. It also needs to be stored in a space that’s locked and fully enclosed.
This article will provide guidance on insurance requirements for older, non-classic vehicles.
Mandatory Liability Coverage
Let’s say you’re at fault in accident, and the other driver has suffered property damage and bodily injuries. Your auto liability insurance would help cover these costs. Liability insurance is required by law in almost all states across the nation. This is true whether you’re insuring an older or new vehicle.
There are two states that don’t require liability coverage: New Hampshire and Virginia.
For most New Hampshire drivers, liability insurance isn’t mandatory. In lieu of car insurance, the law in that state requires drivers to show they have sufficient funds on hand to cover all related costs if they are found to be at fault in a car accident. This is known as proof of financial responsibility, and it can take the form of depositing money or securities with the state treasurer.
However, the situation is different for New Hampshire drivers with certain convictions on their record. If you have traffic convictions such as a DUI or leaving the scene of an accident, New Hampshire law requires you to file proof of insurance.
In Virginia, drivers can skip liability insurance as long as they pay an Uninsured Motor Vehicle Fee to the state’s Department of Motor Vehicles. This $500 fee doesn’t provide insurance coverage; it merely permits you to drive your uninsured vehicle at your own risk.
With liability insurance, there are mandatory minimum coverage limits. These limits may vary from state to state. This is important to remember if you’re moving, since it means the coverage you currently have may not meet the legal minimum in your new location.
For example, in Florida, the minimum requirement is $10,000 of injury liability coverage for one person, $20,000 for all injuries, and $10,000 for property damage in an accident (written as “10/20/10” coverage). This is a lot less coverage than is required in a state such as Maine. In that state, drivers are required to carry at least $50,000 of injury liability coverage for one person, $100,000 for all injuries, and $25,000 for property damage in an accident (or 50/100/25 coverage).
Comprehensive and Collision Coverage
Comprehensive and collision (also referred to as comp and collision) are two common types of auto insurance. As its name suggests, collision insurance pays for damage if you have a collision with another vehicle. Comprehensive insurance provides financial protection in cases where there’s vehicle damage that isn’t collision-related, and it covers events such as hailstorms, vandalism, and theft.
If you have a new car that’s leased or financed, the leasing company or lender will typically require you to purchase comprehensive and collision coverage, since this insurance helps protect their investment in your vehicle. However, unlike liability insurance, comp and collision coverage isn’t required by state law.
All other things being equal, the cost of comp and collision coverage for an older car will likely be less than the coverage cost for a comparable new vehicle. This is because older cars are typically worth less than newer cars, due to depreciation. Because of this loss in value, older vehicles typically cost less to repair or replace than their new counterparts, and this translates into lower insurance rates.
If you have a new car that you own outright, getting comp and collision coverage is a no-brainer, since it can shield you from steep losses if your vehicle experiences damage. However, things aren’t so cut and dried with an older vehicle. You’ll need to consider the yearly cost of your comp and collision coverage as well as your car’s market value. Dropping comp and collision will save you money in premiums, but doing so means you’ll have to cover the bill if your car is damaged or totaled in an accident.
If your older car isn’t worth very much and you have enough saved to cover vehicle repair or replacement, skipping comp and collision may be a smart idea. According to the Insurance Information Institute, if your car is worth less than 10 times the annual premium paid for comp and collision combined, it’s wise to consider dropping this coverage.
Personal Injury Protection and Medical Payments Coverage
Medical payments coverage is also known as medical expense or MedPay. This optional coverage can help pay for direct medical expenses incurred by the policyholder and passengers traveling in the vehicle at the time of the accident. It may cover things such as ambulance fees, surgery, x-rays, prostheses, and professional nursing services.
Personal injury protection (PIP) is mandatory in some states and optional in others. As with MedPay, PIP coverage can help pay for direct medical costs following an accident. It typically covers a broader range of expenses than MedPay. For example, if your accident injuries prevent you from working, PIP may cover your lost wages.
If you have health insurance that provides solid accident coverage and you live in a state that doesn’t require you to purchase PIP, you may want to consider skipping PIP and/or MedPay. Otherwise, keep in mind that accident-related medical expenses can be extremely burdensome, and many older cars aren’t equipped with modern driver-assistance features that can prevent crashes. If you have no health insurance or if your policy provides little or no coverage for car accidents, it’s advisable to invest in MedPay or PIP coverage.
Uninsured and Underinsured Motorist Coverage
Uninsured and underinsured motorist coverage is mandatory in some states and optional in others. This type of coverage can help foot the bill for medical expenses or property damage if you’re involved in an accident that’s caused by a driver with little or no auto insurance.
If you live in a state where this coverage is optional, it may be worth looking into. Your health insurance limits and the value of your car are factors to consider when deciding whether this type of coverage is a useful fit.
Emergency Road Service
Emergency road service coverage is always optional and relatively inexpensive, and it gives you round-the-clock assistance if your vehicle needs to be towed or jump-started, or if it needs an oil delivery. An older vehicle is a lot more likely to suffer a breakdown than a new one. With this in mind, emergency road service coverage makes sense when covering an older car.
Traditional vs. Pay-per-mile Insurance
With traditional car insurance, you’re required to estimate how many miles you typically drive each year, and this estimate is a factor in your final rate. Pay-per-mile insurance takes a more precise approach to mileage. With this type of coverage, a device is installed in your car that measures your monthly mileage; alternatively, the insurance company may give you a photo app that can use to snap a picture of your odometer. Your premium is partially based on the number of miles that you drive each month.
If you’re a low-mileage driver, pay-per-mile insurance may be significantly less expensive than traditional coverage. It’s worth considering if you spend less time behind the wheel than the average driver. For example, if you work from home and aren’t racking up miles on a daily commute like most drivers, this type of coverage may be an ideal fit. According to Nationwide, pay-per-mile insurance will almost certainly provide cost savings over traditional insurance for those who drive fewer than 8,000 miles per year.
The Bottom Line
Car insurance can sometimes feel like an unwelcome expense, but it provides financial protection that can be essential if you own an older vehicle. While coverage such as comp and collision may be unnecessary for some drivers, certain types of auto insurance may provide invaluable support and peace of mind for those who drive older cars.