Agreed value - market vs replacement cost
Discussion
A chap I know has run into a bit of a problem with classic car insurance, wondering if anyone here can help.
He has a 1959 Series II Land Rover, freshly restored to a good standard (galvanised chassis, rebuilt bulkhead, bare metal respray, TDi engine, rebuilt gearbox and axles, loads of other new bits) at a total cost (including the base vehicle) around £12000, which is not out of the way for this kind of work. Vehicle has been built up to his exact specification so it is non-standard in various respects and unique.
He tried to arrange agreed value classic car insurance based on the cost of replacing this vehicle with an identical one (i.e. £12000) and the insurers said no. They will only agree a value up to the 'open market value' which, as usual with full restorations on old Land Rovers, is going to be about two-thirds of what it cost him. The insurers want an independent valuation, but are insisting that it is based on market value, and I cannot see anyone being prepared to sign off the market value of his vehicle as £12K, because it isn't. So if the vehicle is a total loss the insurance will not cover anything like the cost of replacing it.
Has anyone else come across this issue, is it common to all insurers, or just the people he is dealing with?
He has a 1959 Series II Land Rover, freshly restored to a good standard (galvanised chassis, rebuilt bulkhead, bare metal respray, TDi engine, rebuilt gearbox and axles, loads of other new bits) at a total cost (including the base vehicle) around £12000, which is not out of the way for this kind of work. Vehicle has been built up to his exact specification so it is non-standard in various respects and unique.
He tried to arrange agreed value classic car insurance based on the cost of replacing this vehicle with an identical one (i.e. £12000) and the insurers said no. They will only agree a value up to the 'open market value' which, as usual with full restorations on old Land Rovers, is going to be about two-thirds of what it cost him. The insurers want an independent valuation, but are insisting that it is based on market value, and I cannot see anyone being prepared to sign off the market value of his vehicle as £12K, because it isn't. So if the vehicle is a total loss the insurance will not cover anything like the cost of replacing it.
Has anyone else come across this issue, is it common to all insurers, or just the people he is dealing with?
I broached this subject with the clubs rep from FJ a little while ago, relating to cars that I know with similar restorations beyond market value. His response was that each car would be treated individually and their expert would look at the information provided to them; they seemed open to valuing a vehicle based on expenditure. After all, you are paying a premium based on the value agreed, and if that value is higher than normal, then their premium rises.
230TE said:
So if the vehicle is a total loss the insurance will not cover anything like the cost of replacing it.
But the base cost of a vehicle plus its restoration cost doesn't make a market value.The person doing the work could be doing it for love or charging £100 per hour;
the final value is the same.
I know of a highly specified (and modified) classic that cost the owner about £80K
to have an expensive specialist do the work.
The owner didn't then use the car much and so decided to sell it;
it failed to sell at auction, with the highest bid of about £30K.
I was under the impression that agreed value was just that, an agreed value - and the premium adjusted accordingly. It would seem common sense to me that it makes underwriting easier becaue the potential loss is defined, unlike with most classic cars where the value actually rises over time.
For e.g. if your chum had an early Rnage Rover 5 years ago he might have got £1500 for it because they were'n't that sought after, a quick scan of "the market" would suggest he needs to part with considerably more than that now! However if he had agreed value insurance and hadn't updated it he would be looking at cover of £1,500.
I realise there has to be an insurable interest so you can't just insure a vehicle for any value you feel, but I reckon the insurable interest is demonstrable here because the vehicle is unique and could only be replaced through repeating the work done.
For e.g. if your chum had an early Rnage Rover 5 years ago he might have got £1500 for it because they were'n't that sought after, a quick scan of "the market" would suggest he needs to part with considerably more than that now! However if he had agreed value insurance and hadn't updated it he would be looking at cover of £1,500.
I realise there has to be an insurable interest so you can't just insure a vehicle for any value you feel, but I reckon the insurable interest is demonstrable here because the vehicle is unique and could only be replaced through repeating the work done.
It's better to have someone else destroy your pride and joy than do it yourself. I had an agreed value on mine which, it turns out, was quite a bit lower than it should have been seeing as I had just spent £10k on it and it was then up to a newer standard (plus the prices were going up for these cars). I claimed (total write-off) through the other idiot's driver's indurance seeing as it was not at all my fault.
They sent out assessors and sought specialist advice and took 6 weeks to offer a measely £25k. They kept fishing for my agreed value but I ignored that. I told them to double it and we'd talk. Their argument was that there was some corrosion seen on the sills and that their "experts" said I could get one of these cars for about £25k.
True you can get a "needs attention" example for this but mine was in excellent condition. No, there was no rust on the sills seeing as they had just all been replaced in the restoration work! Also, a 50 year old car will always have a little corrosion somewhere but this one did not have any on the sills!
When I used terms like their client's "reckless" driving and that it was their responsibility to put me back in the position I enjoyed before the accident (which meant I could have insisted on an uneconomic rebuild of the car - over £100k as it is arguable that it was unique) and said that, as an enthusiast of this particular motor, I know the market better than their "experts". They finally asked me to help them build the cost case. I did some surfing, built up a list of similar motors for sale which validated everything I had said and we very quickly settled for £50k.
Moral of this story? Don't write your own car off!
They sent out assessors and sought specialist advice and took 6 weeks to offer a measely £25k. They kept fishing for my agreed value but I ignored that. I told them to double it and we'd talk. Their argument was that there was some corrosion seen on the sills and that their "experts" said I could get one of these cars for about £25k.
True you can get a "needs attention" example for this but mine was in excellent condition. No, there was no rust on the sills seeing as they had just all been replaced in the restoration work! Also, a 50 year old car will always have a little corrosion somewhere but this one did not have any on the sills!
When I used terms like their client's "reckless" driving and that it was their responsibility to put me back in the position I enjoyed before the accident (which meant I could have insisted on an uneconomic rebuild of the car - over £100k as it is arguable that it was unique) and said that, as an enthusiast of this particular motor, I know the market better than their "experts". They finally asked me to help them build the cost case. I did some surfing, built up a list of similar motors for sale which validated everything I had said and we very quickly settled for £50k.
Moral of this story? Don't write your own car off!
The shoe's on the other boot in my case.
The insurer (AF) accepts my original purchase invoice price from a couple of years ago, but will not increase the value in line with perceived appreciation, without something in writing to back this up. My club will only value it to that of a similar vehicle that has been restored.
However, mine is a time-warp as-new ultra low mileage example (possibly the lowest anywhere), so the value is whatever someone would be prepared to pay if I sold it, which would be a good deal more than a restored high-miler.
In my past experience, it is good to get friendly with your local classic car dealer, who will write you a valuation reflecting what he would sell such a car for.
The insurer (AF) accepts my original purchase invoice price from a couple of years ago, but will not increase the value in line with perceived appreciation, without something in writing to back this up. My club will only value it to that of a similar vehicle that has been restored.
However, mine is a time-warp as-new ultra low mileage example (possibly the lowest anywhere), so the value is whatever someone would be prepared to pay if I sold it, which would be a good deal more than a restored high-miler.
In my past experience, it is good to get friendly with your local classic car dealer, who will write you a valuation reflecting what he would sell such a car for.
Surprised to hear that a club will not support a higher than normal 'agreed value' for an especially good example. Try a local Club officer?
However, I think your low-mileage may not mean that it is a premium car, and that is why your club will not support you. Does it have any other features, early VIN, lots of 'optional extras' that work?
John
However, I think your low-mileage may not mean that it is a premium car, and that is why your club will not support you. Does it have any other features, early VIN, lots of 'optional extras' that work?
John
Edited by tapkaJohnD on Saturday 16th June 12:32
I have just reinsured the XKSS after its transformation. The market value is higher than the D-type that it was, but the market value is nowhere near the cost of having a replacement built, but what can you do? Market value is really what it is all about and what my insurers agreed, but that can and does change rapidly, sometimes for the worse. like 1992. Four years back a similar car was sold for £80,000 and last year three times that, but values of all classics seem to be softening, judging by how stock seems to be sticking at the dealers and by the private adverts.
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