Insurance considerations for older cars

Coverage limits (and how they are determined) is one way classic car insurance differs from traditional car insurance for an older vehicle.

A standard car insurance policy may include comprehensive coverage or collision coverage with limits based on the car's depreciated value (its "actual cash value"). So, if your car is totaled in a covered collision, the maximum amount your insurer would pay you to help replace it is the car's depreciated value.

A classic car insurance policy, on the other hand, may have coverage limits based on the car's "agreed value." The agreed value may be based on the car's condition, special-order parts, improvements and the cost to replace the car. (In other words, the coverage limits isn't based simply on the car's age and mileage.)

Your rates for comprehensive coverage or collision coverage on an older vehicle may be lower than what you'd pay for those same coverages on a newer car that's worth more. That's because you'd have less coverage (lower "coverage limits") on an older car. Older cars are typically worth less, as their value depreciates over time.

You may also be able to drop comprehensive coverage or collision coverage from your policy if your car is paid off. If you drop coverage and your older car is damaged in an accident, however, your policy won't pay for the damage.

Even without comprehensive or collision coverage, you'll need to pay for other coverages on your older car, such as liability, that are required by state law. Additionally, your insurance premium depends on a number of factors, including the type of car you drive, your driving record, where the car is kept and more. So, the total premium you'll pay for auto insurance on an older car is unique to you.

Drivers in most states are required to carry liability coverage, regardless of the age of the car. Each state sets minimum coverage limits that you must purchase to insure your vehicle. The Insurance Information Institute (III) suggests increasing your liability limits beyond your state's minimum requirements, however, since liability coverage may help protect you from significant financial loss if you're sued.

Bodily injury liability coverage may help pay for someone else's expenses if you injure them with your vehicle. It may help cover victims' medical expenses, income loss and your legal fees.

Property damage liability coverage may help pay for damage you cause to someone else's car. It may also help cover damage to other property, such as fences, buildings, telephone poles and more.

Certain car insurance coverages are required in some states and not others. Check with your insurer or your state's insurance commission to see whether you'll need to carry the following coverages on your older car:

Uninsured and underinsured motorist coverage may help cover your medical costs if you're injured by a driver with no insurance or not enough insurance. In some states, this coverage may also help pay to repair your vehicle if it's damaged by an uninsured or underinsured driver.

Medical payments coverage and personal injury protection (PIP) may help pay for your medical care if you or your passengers are injured in a car accident. Medical payments coverage may help pay medical bills for doctor visits, hospital stays or surgery. PIP, which is not available in all states, may offer similar protection and also extend to lost wages, childcare and even funeral expenses as a result of a covered accident.

If your vehicle is paid off — in other words, if the car's title is in your name —some insurance coverages are optional. (Lenders typically require collision coverage and comprehensive if you're still paying off your vehicle, the NAIC says.) Depending on your needs and your budget, adjusting these coverages might be an option for your older car.

Collision coverage and comprehensive coverage help protect your car. Collision may help pay to repair your vehicle if you hit a stationary object, like a fence or a tree, or if you're involved in an accident with another vehicle. Comprehensive, on the other hand, may help pay to repair your car if it's stolen or damaged by something other than a collision (such as a falling object or a fire).

Both collision coverage and comprehensive coverage typically come with a deductible that you may be able to adjust. Keep in mind, however, that while a higher deductible can lower your premiums, you'd likely end up paying more out of pocket toward a covered claim.

Additionally, the III suggests that if your older car is worth less than 10 times the annual premium you pay for collision and comprehensive coverage combined, these coverages might not be a cost-effective option for you. In other words, you might want to talk to your insurance provider about whether it makes sense to drop these coverages from your older vehicle's policy. But keep in mind, if you drop coverage and your car is damaged in an accident, your policy won't pay for the damage.

Towing & labor cost coverage may help pay for services associated with roadside breakdowns, which may include towing, jumping a battery, changing a tire or assisting with a lockout. While this coverage is optional, it might come in handy in case you have problems with your older vehicle.

Of course, price should never be the only factor in choosing what kind of auto insurance you need for your "seasoned" car. Your insurance provider can help you choose affordable coverage that still helps protect your car and your family.