Everything You Need to Know About Luxury and Exotic Car Insurance

Many people dream of owning a beautiful car. Aside from the expensive price tag and hefty maintenance fee, most think very little about the insurance coverage. This article will tell you everything you need to know about purchasing a policy for your prized vehicle.

Definition of Luxury and Exotic Vehicles

The definition of luxury and exotic can differ depending on each consumer's standards. But in general, luxury cars stand for vehicles that are designed to stand out from the crowd and made with higher quality material. Although not every line they make is qualified as luxurious, these brands have earned a reputation of consistently producing high-quality, tasteful-looking automobiles with advanced technology features and gadgets. The most common brands you see on an everyday basis are Mercedes-Benz, Infiniti, BMW, Audi, Acura, Lexus, Jaguar, and Cadillac. There are even higher end luxury ones such as Bentley, Royce-Royce, and the ultra-top line of Mercedes Benz. But what sets exotic autos from our everyday cars? These rare collectible items are:

• Super high performance and require a lot of experience to handle them properly.
• They usually cost more than $100,000 and up. Unique limited edition new exotic ones can cost as much as $500,000. Antique collector exotic ones can even run into millions of dollars.
• They require specific tools to repair and maintain. Even a simple oil change and regular maintenance job without the proper tools and designated auto body shop will void the warranty.
• Repairs are guaranteed to be expensive because only genuine parts from the original manufacturer will be used for replacements. Using non-genuine parts will not only void the warranty but also depreciate the value and performance.

As you have probably seen from many action films, these exotic beauties come from Porsche, McLaren, Lamborghinis, Ferrari, Aston Martin, and Maserati brands.

Average Costs of Luxury and Exotic Auto Insurance

If you want to find the yearly auto protection surveys on these rare automobiles, you may have a tough time searching for this information on the internet. This is because these are so rare that the consumer reports tend to treat them as outliers from the statistics and usually not helpful to the average consumers who tend to be:

• Single
• 40-year old male with good credit and clean driving record history
• Travel 12 miles to work
• Average plan limit of $100,000 in injury liability for, $300,000 for all injuries, $50,000 for property damage in an accident, and a $500 deductible on collision and comprehensive coverage

Premium Quotes for 2016 Popular Luxury Cars

According to a study by Quadrant Information Services, the average premium rates for the 2016 most popular luxury/exotic automobiles are listed below. Please note that these averages are based on the 40-year old male driver with clean driving record and excellent credit history. Your quote may come out lower or higher depending on your risk factors. Just for a comparison reference, the 2016 Toyota Camry SE MSRP is $38,552 and the average annual premium quote is $1,807. In addition, you should know that these numbers are only for the more common luxury autos. The exclusively high-end models will cost much more depending on the manufacturer's suggested retail price and other risk factors considered.

Why Are the Luxury/Exotic Automobile Premium So Expensive?

In general, you can expect your premium rate to reflect upon the price of your auto. But you may ask why is the discrepancy so big? This is because:

1. Pricy vehicles always cost more to fix as their parts are costlier.
2. Luxury and exotic automobiles always require unique original parts for replacement. The high-end automobiles are always imports from foreign countries. This makes it even harder to find the certified replacements and require more money to ship these heavy parts to the United States.
3. They require special tools to work on, and the technicians need extra training for the specificity of the jobs. This specialist charges much more than the average auto body shop technicians. On top of that, these experts are only available in certain cities. If you do not live in one of these areas, the companies will require sending it for repair in another city. The towing process will cost quite a lot of money to ensure your vehicle returns to you safely without any scratch and damages.
4. Unlike economic ones, these high-end automobiles do not depreciate in market price. If anything, limited editions made for the anniversary celebration of these high-end manufacturers can increase in their value over the years. If they are totaled or damaged, the price of replacing or fixing them are outrageously pricey.
5. These high-performance automobiles tend to attract the young crowd of consumers who have a liking towards speed and risky driving habits. As a result, owners tend to be labeled as "high-risk drivers."
6. Certain luxury autos are common theft targets because they are highly sought after, or their parts sell for great prices in the black market due to the popularity.

Problems with Ultra-Exotic Vehicles

You may wonder why ultra-exotic automobiles such as Ferraris and Lamborghinis are excluded from the survey. This is because there are very limited number of companies in the United States that will provide protection for these two brands. Not only that, they are very selective with which model they will protect, and the requirements needed to comply are extremely strict. According to a survey conducted by the Quadrant Information Services, the starting cost of an annual Lamborghini protection plan costs roughly between $5,000 and $20,000. Compared to the $3,000 to $5,000 cost of more common luxury autos, these high-end racecars can be a nightmare to insure. You may think that the premium is so outrageous because of the value. That is only 1 reason. These providers charge such a hefty fee because:

• They consider these exotic automobiles a sign that the driver follows a certain dangerous lifestyle that includes driving at high speed and engage in risky driving behavior.
• Sports cars are costlier to insure because it takes a professional to handle such a powerful vehicle. Driven by someone who has limited driving experience is considered as a significant risk as they are much more likely to be involved in an accident that can lead to serious injury and damage to the auto. In the worst case, death can result from inexperienced drivers.
• Most owners want full coverage on their prized possession and do not mind the extra cost as long as they are protected in the worst-case scenario.
• Many of the owners are young and within that "high-risk driver" range.
• These high-end racecars are often targets of vandalism and theft activities just because they attract so much attention. So, you can see why carriers see a $400,000 car and a $30,000 sedan so differently.

What You Should Know About Value Determination

When it comes to purchasing a protection plan, you should understand these 3 terms: agreed value, actual cash value, and replacement cost. They dictate how many your provider will reimburse you for the damage and/or totaled cost.

Agreed Value:

This is the price agreed upon by both the provider and the plan holder concerning the reimbursement cost in the event of major damage, total loss, or theft incident.

Actual Cash Value:

This is the amount of money the company owes you from damage, total loss, or theft incident. This value is set upon the current market value of your car minus the depreciation cost.

Replacement Cost:

This is similar to agreed value but it only applies to automobiles that have been owned for less than 3 years. This is the amount of money the carrier owes the owner in the event of total loss or theft incident. In this case, the depreciation cost cannot be applied to the reimbursement cost.

When you are shopping for a luxury/exotic automobile policy, you must inquire whether the company applies the agreed value or replacement cost value. If not, you can run into a problem when you find out that they will only honor the actual cash value system and reimburse you for their own maximum amount under their policies.

Will Normal Insurers Sell You a Plan?

Here is the short and simple truth about almost all the auto companies in the United States. They will likely ensure the common brands of luxury auto such as BMW, Mercedes-Benz, Audi, Acura, Lexus, Infiniti, Cadillac, and Jaguar. However, some companies will turn you down on the exotic race car brands simply because they do not know enough about these uncommon automobiles and want to avoid getting into lawsuits concerning the reimbursement settlements. Having said that, there are common insurers who will offer you protection for your luxury and/or exotic automobiles.

Allstate

Although they are known to be a littler pricier than other carriers, they are known to insure exotic, collector, and antique cars. However, you should know that they will only take customers who have a good driving record. Those who have several bad accidents and traffic violation records will most likely be turned down.

State Farm

They have the reputation of reasonable rates and speedy pay out for repair and replacement costs. What makes them a great company is that the longer you stay with them, the lower your rates will become. On top of that, if you bundle your protection plan with your home and life policies, you can expect your rate to be much lower than other companies.

GEICO

Even though GEICO does not cover exotic high-end racecars such as Maserati, Ferrari, Aston Martin and Lamborghini, they do offer securities to more common luxury ones such as the Porsche Cayenne and 911, BMWs, and Mercedes-Benz.

Progressive

Starting out as high-risk auto insurers, Progressive does not have a firm guideline whether they will insure exotic and luxury vehicles. If you are already an existing customer and you have a clean driving record along with great credit history, they may accept your exotic/luxury coverage. Please note that even if they accept your application, their limit is only $150,000. So if you totally damaged your $500,000 racecar, they will only send you a check for $150,000.

Safeco

Even though they rank 11th out of 21 of the biggest insurers in the United States, they are rated with 4 out of 5 stars based on J.D. Power ratings for customer service and claims satisfaction. They do offer underwriting to exotic automobiles.

When you are shopping for a normal carrier, be sure to inquire their handling procedure of your auto in the event of an accident. How will they treat a repairable accident? Will you have a choice where to send your automobile for repair? In the event of an accident where it is totaled, how will they settle the reimbursement or replacement? Also ask about how many mileages you will be allowed to travel.

Problems with Normal Coverage Carriers

Even though common automobile companies do underwrite policies for high-end autos, there are some serious drawbacks to their services.

• They rarely have policies with agreed value option provided. If they do provide such service, the premium cost will come out extremely high.
• Common providers usually go by actual cash value as reimbursement. Also, they have a maximum reimbursement payout. Meaning if your auto is worth $300,000 and their maximum payout is $200,000, they will only write you a check for $200,000 and you suffer the rest of the loss.
• They automatically see racecars as high-risk drivers no matter how old you may be. This may put a red-tag alert on your profile and increase the rate for your everyday car as well. You may think that this is outrageously unfair, but compared to a Toyota Prius with only 121 horsepower, a Maserati Ghibli with 454 horsepower can definitely cause a lot more damage.
• Even though they may underwrite policies for younger drivers, the premium will be insanely expensive as the age factor combines with the costly automobile equals the highest-risk holders.
• Everyday insurers tend to have their own authorized repair centers. This is the main issue for many of the exotic automobiles that require specialist maintenance and bodywork. If you are forced to go with the provider's centers, you will void your warranty and devalue its worth. If you decide to go with your specialist, the provider will only reimburse you for their adjuster's approved value. You will be forced to pay for the rest of the repair fee out of your own pocket.

Specialty Insurance

Specialty protection is required to completely cover unique automobiles that the regular insurers would not usually cover. Even if the regular companies accept your application, they will only offer a max value they insure. What this means is that if you spent $250,000 on your luxury car, your insurer may not value your protection plan to that level. If this is the case, if you total your autos, you will have to pay the difference between your maximum payout and the actual value. If you wonder whether specialty policy is necessary, ask yourself these questions:

1. Is your auto worth more than where it is parked? If you park your $250,000 racecar at a location that only covers $100,000 damage limit. If it is totaled at the location, you will only receive $100,000 for your loss.

2. Is it one-of-a-kind unique and/or high-end racecar? These autos are often not accepted by the regular insurers. Your best bet is going with a specialty provider.

3. Do you need a gap option to pay the difference between the maximum payout and the actual value of your car?

Quote on Specialty Auto Protection Policies:

Just like getting a regular auto plan, all factors are taken into consideration when these private specialty providers quote your premium:

• Brand
• Age of the auto
• Monthly/annual mileage driven
• How often do you drive the auto
• Age of the driver
• Other drivers added to the protection
• Whether this is your primary or secondary form of transportation
• Exterior and interior condition of the automobile

Because your car may have certain customization work added, these companies are very likely to request photographs and proof of these added accessories to document its actual worth and underwrite you a plan for your needs.

Reasons Why Specialized Auto Coverage is Better Choice

1. ‘Agreed value' offers much more protection than ‘actual cash value'

   The number 1 reason specialized insurers are superior to standard auto cover is that the latter only pays out the "actual cash value." For luxury and exotic automobiles, the depreciation rule simply does not apply because these collectible items only increase in value throughout the years if they are well taken care of. On the other hand, when you go to these private companies with knowledgeable agents, they understand and appreciate how much your car is actually worth. They will be able to underwrite you a better plan with an agreed value that both you and the company can agree upon. So when worst comes to worst, they will pay out the set amount, and you do not have to go through the ordeal of battling with the provider adjuster.

2. They Understand the Market

   These people are car lovers themselves, and they understand what it takes to maintain and protect these prized collector items. They also know that most of their customers tend to store them in well-protected storage areas and only take them out for short drives on occasion. Instead of treating these consumers as high-risk drivers, these companies are known to be selective with their customers and give them a break on their premium for being responsible drivers.

3. Specialty Insurers Delivers What They Promised

   Even though you may pay more for a plan, you can be assured that these providers go the extra distance to help you keep it in its original condition. Instead of forcing you to go with their own authorized repair shop, they allow you to choose your own trusted auto body shop. Moreover, they will reimburse you for replacing destroyed and damaged parts with genuine factory products so that you can keep your warranty and maintain the worth.

4. You and Your Wheels are Protected in Events

   All normal companies will void their promise if you are injured or damage it at any show events. If you like to show off your collection in auto shows and races, your only choice is to secure protection with these private companies.

5. Many Awesome Perks with Coverage

   These high-end insurers tend to cost more than the common providers. However, they do pack on some great perks:

• No daily limit on vehicle rental, meal, and lodging reimbursement by the loss of use of your automobile
• Rental protection all over the world
• Medical care and counseling fee reimbursement after carjacking incidents
• Lots of freebie services such as roadside assistance, pet injury protection, and personal property coverage

On top of all these services, many people like the prestige that comes along with subscribing to these providers.

Limitations of Specialty Coverage Companies

It may sound like a must for any drivers who own a luxury or exotic automobile, but private providers have their drawbacks as well:

Age Requirement

Trying to sift out the high-risk drivers, these private companies always require their customers to be over 25 years old (some companies even raise the limit to 30) and someone who holds a driving history of a certain set of years (most companies require 5 years of experience). If you do not meet these requirements, you can only be written as an add-on driver on your parents' policy. This also means that you will be required to write the ownership under your parents' names as well. If you are a parent who wishes to gift your child an exclusive automobile, this problem also applies to you. The problem with this solution is if your child gets into traffic violations, you may be penalized as well. Worst case scenario, you will lose your coverage as well.

Strict Driving Record Requirement

Most of these carriers treat your driving history very seriously. They will only allow you to have 1 or 2 traffic violation and/or at-fault accident on your record. Any more and you will either have to hire a lawyer to remove previous history or face the consequence of being dropped by the company. As mentioned earlier, any other driver written under your protection plan also counts towards your profile.

Title Requirement

Many drivers purchase an auto under their company or a single-entity LP or LLC for tax write-off purposes. This is a problem for most of these specialty insurers as they require the policy to be written in the name same as the person holding the title.

Discrepancies amongst Agents and Companies

Having these collector items are rare, the value set by the agents and companies can be somewhat objective to a certain degree.

You Better Have Another Car

These companies see your auto as a collection item rather than a regular use of transportation. Many of the insurers go as far as setting another regular use automobile as a requirement of purchasing a policy for your luxury/exotic automobile. Also, they have set a strict maximum amount of mileage you can drive with your agreed limit. The restriction is around 5,000 to 2,500 miles depending on each company's guidelines. Any violation can get you a hefty penalty or protection cancellation.

Strict Modification Regulations

Modifications always make the equation more complex. To avoid lawsuits and disagreement with the owners, most private carriers have extremely strict rules concerning what modifications are allowed. Other insurers will simply turn away any altered vehicle based on the complications.

Proof of Secure Storage

Another requirement from these private insurers is to proof that you are doing your part to protect your collectible from vandalism and theft. Just like proofing the condition of your automobile, they will need photographs of the facility along with any anti-theft device you have installed for the protection purposes. On the other hand, if they are completely satisfied with your efforts and proactive approach, they will be happy to lower your premium.

Specialty Protection Providers

J.C. Taylor Specialty Automobile Insurance Agency:

In order to be accepted by this company, you and your automobile must meet these requirements:

1. You must be at least 25 years old

2. The auto must be used as a secondary means of transportation and you must meet the monthly mileage limit

3. You have no more than 1 traffic violation on your driving record

4. It must be a factory original with minimal changes

Hagerty Classic Insurance:

This company is one of the oldest specialty automobile provider in the United States with over 20 years of business experience. It is known to have a low-cost full coverage, liability, and collision premium rate, and it has the most extensive number options available to luxury and exotic automobile owners:

• Gap coverage for agreed value for insured item
• Employees all have collector vehicle training
• Medical reimbursement for auto show competition injuries
• Specialty cover plans tailored to each driver
• Roadside assistance options
• Repair reimbursement for original parts replacement

Grundy Worldwide Specialty Automobile Insurance:

With 60 years of business history, it is a great competitor of Hagerty. Here is a list of services they offer:

• Gap coverage for agreed value for insured auto
• Medical reimbursement for auto show competition injuries
• Repair reimbursement for original parts replacement
• High liability limits
• Unlimited mileage limit
• Towing and labor parts cost are covered depending on your plan

Heacock Specialty Automobile Insurance:

Heacock has been in the specialty protection business for over 30 years. They require the drivers to have at least 10 years of driving experience and their exotic autos to be at least 15 years old. Therefore, if you are into antique collector exotic automobiles, this will be your best choice as they have these amazing benefits:

• Zero deductible offer
• Gap coverage for agreed value for insured auto
• Your choice of repair shop

PURE Luxury Auto Insurance:

Although newer than the other companies, they do offer a competitive edge that includes:

• Reimbursement of agreed value in the event of total loss accidents
• Gap coverage to pay off your loan if it is leased
• Reimbursement of the full cost of original replacement parts
• Rental car included in plan
• No deductible for uninsured protection
• Worldwide security

Other Worthy Mentions:

• Leland West
• Barrett Jackson Collector Insurance
• NCM Insurance
• AIG Private Client Group High Value Auto Insurance
• Save-On Insurance Services
• Adrian Flux
• ACE Group
• The Chubb Group
• Fireman's Fund
• Nationwide private Client

Hair

Troy Polamalu of the Pittsburgh Steelers had his hair insured for $1 million after signing on to be a spokesman for Head & Shoulders shampoo.

Breasts

Dolly Parton insured her breasts for $600,000.

Legs

Mariah Carey's legs were insured for $1 billion when she signed on to promote Gillette razors. However, Rihanna's were only insured for $1 million in the same deal.

English football star David Beckham's legs are insured for $70 million

Penis

David Lee Roth, former singer of Van Halen, insured his penis whom he refers to as "Little Elvis" for more than $1 million to protect him from paternity suits.

What Type of Coverage Should You Buy?

Do you actually need special luxury car policy or will any plain one work? Luxury cars are different than economic ones. They cost more to make and maintain. Consequently, it makes sense that they cost a lot more to insure as well. Having said that, protection is the same no matter what type of vehicle you own. The only difference you are going to see is the overall cost of the plan. The reason is that insurers have to pay more to repair or replace it if you happen to be in an accident. You most probably want to have a high level of protection that the insurer will cover.

Liability Protection

Although you always have the option to purchase your state's minimum liability protection, you should know that this amount will most likely not be enough to cover the cost of any repair on your auto. When you purchase liability insurance, you should always consider the worst possible scenario and how much money is needed for the situation.

Collision Coverage

Although you may already decide that you will end up paying for most of the repair out of pocket, you should always purchase collision insurance in a case where it is totaled severely and needs to be replaced or repaired. Collision insurance is crucial because it is the only insurance that will cover the cost of repair and replace of your automobile.

Comprehensive Policy

Although comprehensive protection is not a must-have for some drivers, it is definitely a must-have for luxury and exotic car owners. Exotic ones are only more likely to be stolen. Although this can increase your premium, it is definitely worth your money just in case your it gets stolen or damaged. Comprehensive coverage provides protection for your auto when it is damaged from vandalism, natural disaster, or when it is stolen. If you are still paying for it on an installment plan, you definitely should look into gap coverage. It is an option that covers the difference between what you actually owe on your payments and what your auto is worth on the current market. In cases where you have an accident, the company will pay the market value, and not the replacement value or your financing costs.

Tips on Lowering Your Luxury Premium

Although each provider has their own logarithm in calculating their applicants' risk factors, most of them usually base your premium on characteristics that suggest that you are a responsible driver and a trustworthy customer. Having good credit history, maintaining a clean driving record with minimal accidents and traffic violations, and keeping your payment on time can all greatly help lower your premium rate. Now for the less obvious tips to lower your premium cost:

1. Do not put your teenage children on your luxury policy. Teenage children (especially boys) are the worst news for companies. Add a luxury car to the equation, you can expect your premium to skyrocket into the "high-risk driver" rate.

2. If you rarely drive your automobile or only take it for short drives, you should not have to pay for a full price one. When you shop, ask your provider for a discount for low mileage driving. Some insurers also offer a program called "Pay as You Drive" premium where you only pay for the miles you drive.

3. If you have purchased it outright and have the funding for minor repair work, you can decrease your premium cost by opting for a higher deductible. If you rarely get into accidents and you only drive your it for a short time, choosing a $1,000 to $1,5000 deductible can make a huge difference in your overall premium.

4. If you are shopping for a plan, you should consult with several agents and companies. If an agent cannot help you, ask if they can put you in touch with a colleague in the industry who is familiar with your auto. If your friend already has an agent, ask if they can put you in touch with their agent. You may be able to get a better rate just by referral.

5. Install anti-theft devices so that you can qualify for discounts.

6. Parking in a secure location with anti-theft devices install can decrease your premium rate.

7. Join a luxury vehicle owner club. These clubs often have a deal with certain insurers, and you can enjoy the huge discounts and benefits that come along with the club membership. Even if a carrier is not linked with your car owner club, just knowing that you are a member make them believe that you truly care for your vehicle and will be much more careful with your auto than the average owner.

8. Drop options that you do not need. If your automobile is more of a collection item stored in a protected facility rather than a form of transportation you drive on a frequent basis, you may want to only get comprehensive protection.

9. Get a policy from the brand private company. For the exclusively rare ones, the companies sometimes have their own insurance branch to ensure the owners get the complete package.

10. Take the chances to remove violations from your record. These days, you can often take a traffic school course on defensive driving in exchange for taking that ticket off your record.

11. Pay for minor damages out of your own pocket. Instead of filing all accident claims that will end up increasing your rates, only file a claim when the damage is severe enough, or the accident involves someone being injured.

12. Etching your VIN onto your auto's windows. Just by doing that can make your vehicle less prone to be stolen since the VIN number acts as a great tracking feature. And for this added safety action, your rate can decrease by 5-10% off your original coverage.

Conclusion

We hope that this article has provided you with some great insight on purchasing an insurance policy for your luxury vehicle. If you have any personal tips and experience stories you wish to share with other fellow readers, please drop us a comment. We would be delighted to hear from you.