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Owning a collectible car could get you auto insurance savings

The Insurance Information Institute predicts auto insurance rates may rise as much as 5 percent in 2011. However, you don't have to be stuck with a bigger auto insurance bill. Insurance professionals suggest a little-known tactic -- switching to a collectible auto insurance policy -- as a possible way to prune your premium.

“There are some specific criteria to qualify, but if you do, a collectible policy can save anywhere from 20 to 80 percent depending on the type of car and the driver’s claim history and driving record,” says Christopher Brassard, executive vice president of the Ten Eyck Group, an insurance brokerage in Albany, N.Y.

Here’s what you need to know to see whether your car can be classified as a collectible -- and to see how much a collectible auto policy can cut your insurance costs.auto insurance collectible

Does your car pass the collectible test?

Laura Bergan, vice president of marketing at American Collectors Insurance, a New Jersey company that specializes in collectible auto policies, says several factors are used to determine whether a car can be insured as a collectible. A car’s age, value, condition, make and model are the most common. So a 30-year-old Corvette in mint condition or a brand-new, limited-edition Ford Shelby Mustang are shoo-ins.

A collectible car shouldn't be confused with a classic car, though. According to the Classic Car Club of America, a car must be 20 to 45 years old to be deemed a classic; a cars that's older than 45 is considered an antique. Age isn't the sole factor in determining whether an insurer defines a car as collectible.

While older cars or those in limited production qualify most often for collectible status, insurance carriers like American Collectors will consider all years, makes and models. “The most important qualifier is how the owner of the vehicle intends to use it,” Bergan says.

In fact, the value of a collectible car doesn’t matter all that much. Therefore, both a $25,000 car and a $250,000 car could be covered by collectible policies.

David Hilgen, a spokesman for the Chubb Group of Insurance Cos., says the number of miles driven and, in some cases, where the car is driven come into play. The number of miles allowed varies by insurance company, but it's generally up to 100 miles a week.

Brassard says some carriers don't want you to drive a collectible car every day or use it to commute to school or work. “They think of the car as one for a leisurely Sunday drive and nothing more,” he says. “Some carriers restrict specific usage and mileage; others do not."

Some sellers of collectible policies even cite where you can park your car if you drive it to a grocery store, mall or restaurant. Carriers like American Collectors are more lenient. “Typically, the vehicle can be driven for pleasure or even occasional general use to and from work or school,” Bergan says.

Hilgen says Chubb’s collectible policies don't limit coverage based on miles driven when a car is considered a hobby, rather than an everyday necessity. While Chubb does encourage collectors to enjoy their cars, a car driven each day to and from work or school might not qualify as a collectible in the company''s eyes.

Where you keep the cars matters, too. Bergan says a car insured under a collectible policy usually must be kept in an enclosed, locked garage. “Carports in gated communities and common garages may be accepted,” she says.

You’re also going to need a clean driving record -- no claims, tickets or accidents in the past five years -- and a minimum credit score of about 650.

Collectible car policies can be 'extremely cheap'

The exact amount you’ll save switching to a collectible car policy fluctuates, according to Brassard. Generally, he says, collectible coverage ranges from "extremely cheap" to roughly the cost of a traditional auto policy. Bergan puts the average premium for a collectible policy at roughly $200 a year. Why so low? Partly because much-pampered collectible cars aren't on the road as much as everyday cars and, therefore, are less likely to be damaged in a crash.

In the event you need to file a claim, you’ll save on the deductible, too. Hilgen, the Chubb spokesman, says it’s common for a collectible policy to be free of deductibles for comprehensive and collision coverage.

In addition to the cost savings, the biggest difference between a collectible car insurance policy and a traditional one is the way a claim is paid.auto insurance collectible

Traditional personal auto insurance policies are written to provide for “actual cash” or “stated value,” says Brassard, the Albany insurance broker. “Those terms mean you’ll be paid what the car is worth should it be totaled."

On the other hand, collectible policies are written based on an "agreed value" -- an amount agreed upon by the insurance carrier and policyholder, Hilgan says. So instead of a car’s value depreciating year after year under a traditional policy -- meaning you’ll get less money in your pocket in the event of a loss -- a collectible policy will pay you the “agreed value” outlined in the policy, regardless of the car’s age.

“Agreed value coverage is the only way to guarantee a vehicle’s full-insured value in the event of a total loss,” says Bergan, the vice president at American Collectors Insurance.

Liability, comprehensive and collision coverage are available through collectible policies; terms depend on your insurer's rules and your state's laws. Despite any disparities, experts say coverage under a collectible car policy differs little from a standard auto policy.

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