Agreed value in a rising market
While the stock and housing markets have undergone a turbulent time in the past couple of years, classic car prices have continued their inexorable rise.
This trend’s most obvious manifestation was in the £20.2million paid for a 1963 Ferrari 250 GTO in early February, a British record.
But more generally, the Historic Automobile Group International (HAGI) has released figures showing that, in some sectors, prices in the classic car market rose by 20 per cent in 2011.
As a comparison, gold prices rose by 10 per cent over the same period.
HAGI says that its index of key collectable classic cars has increased by a compound average of 12 per cent a year for the past 30 years - a tidy investment for those with plenty of patience.
All of which has implications for those with agreed value insurance who may be inclined to just let their policy renew each year.
Do that for a few years and you could be risking a hefty shortfall in the car’s true value should the worst happen, especially if you’re one of the lucky few with a classic Mercedes at the top end of the market.
To give it its technical definition, agreed value is an insurance contract under which the insurer agrees to pay the insured a stated amount in the event of the total loss of the property insured without any adjustment for depreciation or appreciation.
Generally speaking, motorists will have to produce good quality photographs (inside and out) of their car, together with their value estimate and an independent valuation from an automotive engineer - usually not by an owners club or a garage who has either sold or carried out work on the car.
It’s also useful to include details of any restoration or modifications carried out to ensure they are covered, though it’s worth remembering that the “cost” of your own time in restoring your vehicle can’t be included in its ultimate value - sounds obvious, but you’d be surprised...
It’s also important to be realistic - although the value is “agreed”, an inspection is still likely to be carried out if you submit a claim, and if the vehicle is clearly in an inferior condition to that described, then insurers are likely to offer the true market value in settlement.
Agreed value insurance isn’t a way of getting more than your vehicle is actually worth, but in an appreciating market it would be folly not to keep tabs on your classic’s true value.