To begin, let’s look at types of insurable “toys”: Motorcycles, Boats, Recreational Vehicles, Dune Buggies and Sandrails, All Terrain Vehicles, Side-By-Side Utility Vehicles, Modified Golf Carts, Golf Carts, Snowmobiles, Collector Vehicles, Travel Trailers and Personal Watercraft.
Why do all of these vehicle types need their own individual insurance coverage? Any vehicle issued a state registration needs to be properly insured. All 50 states have adopted the required minimum liability insurance requirements. In Arizona, the minimum liability limits are 15/30/10. Insurance is not designed to have one policy meet all vehicle needs. If you need a screwdriver you do not buy a hammer. Vehicle insurance is no different. A motorcycle policy is not designed to cover the insurance needs of a boat.
What makes these vehicle’s insurance coverage requirements different from auto insurance? Insurance for automobiles is rated on several factors such as garaging zip code, daily usage, one way miles to work, new and current value, number of liable accidents your specific automobile is involved in, the state you live in, and your own personal driving history (tickets and accidents).
Insurance for “toys” is primarily based on usage and value. Example, a highly ‘customized’ Harley-Davidson has an increased premium for physical damage (Comprehensive and Collision) because to replace the ‘custom’ paint and accessories cost more that the factory stock accessories. The liability is the same amount no matter the increased value of the motorcycle. Motorcycles are the exception to the daily usage factor because some are used as a daily commuter vehicle.
Another example, street legal sandrails can sell for over $100,000 directly from the manufacturer. Again the liability is based on the frequency of accidents that particular vehicle is involved in over the past 5 years or more and the average dollar amount paid out. Where the majority of premium is derived from is value, the amount the insurance company is responsible to pay out in a total loss. In this case, the insured value is $100,000. The usage of the vehicle is obvious, it is not going to be used as someone’s daily commuter vehicle so garaging zip code, one way miles, rural or urban residence are not substantial factors used in determining the premium. However, without these factors, insurance companies have a harder chore determining a competitive yet profitable premium.
Let’s take a look at boats and factors involved with determining their rates. Boat insurance is based on 3 independent items: hull, motor, and trailer. All three items are value based premium determination because each can be destroyed independent of the other two. The motor is the largest rating factor for liability because that is what causes the accidents. All boat insurers want to know the horsepower and maximum m.p.h. the motor is capable of obtaining.
The larger the motor the faster the boat goes which creates difficulty in handling and increases chance of a liable accident which have direct consequences in the rate. Sailboats with in board diesel motors also fall into this rating category but, because the horsepower and typical usage of the vessel is sail power, liability for sailboats is obviously much lower than power boats. The hull rate is based almost solely on new and/or current value same with the trailer. Base rates for a 25′ performance ski boat are much higher than base rates for a 25′ day cruiser sailboat due to the handling differences of under power versus under sail.
Recreational Vehicles, including travel trailers, are truly a unique risks to insure and determine a competitive rate. RV’s are a combination of auto insurance and home insurance. If you think about it, RV’s are a house on wheels with your own personal items inside traveling around the country. Much more so than today’s Mobile Homes which are no longer manufactured to be mobile once placed on your property. Rates are determined in common with auto insurance: usage, value, garaging zip code and state, and liable accidents. Along with other ‘toy’ items, RV value also has a determining factor in rates.
Most insurance companies will allow full replacement cost on an RV less than five years old. What that means to you, the RV owner, is you have an option to insure the vehicle’s value for what you paid new within the first five years of that vehicle. After the fifth year, the value determination goes to actual cash value, otherwise known as depreciated or current value. Example: on 01-01-2010 you purchase a 2010 Monaco for $100,000 you can insure that vehicle for $100,000 replacement value until 2015. If you purchased a 2005 Monaco for $100,000 on 01-01-2010, the insurance company will value it at the current value regardless of what you paid.
What about your possessions in the RV? Like auto insurance, if an item came with the RV from the manufacturer it is included in the optional physical damage (comprehensive and collision) portion of the policy. If you brought a personal possession into the RV from your home as a permanent item, then you need to notify the insurance company of the increased amount of possessions. Most RV policies have built in limits ranging from $1,000 to $5,000. If your possessions exceed the built in limit, you should call your agent to increase the policy limit.
My favorite of the ‘toys’ are collector cars. Hot Rods, Street Rods, Classic Muscle cars, European Exotics, Kit Cars all examples of collector car classifications. These are simple policies insuring primarily the appraised value of your vehicle. The two main insurers of collector cars are Hagerty and Grundy Worldwide. The applications are simple and easy. That is because they know you are storing your baby in the garage only bringing her out to show off or take her to the Saturday car show.
Typical liability for these policies is less than $100 per year for $500,000 coverage limit. The bulk of the rate is determined from the insured value also known as appraised value. You will be required to obtain an appraisal from an accredited appraiser in your area and submit that to the insurance company. Usual set rates range from $.20 per $1,000 of value to $.75 per $1,000 of value depending on age of your vehicle and if it is considered high performance like Corvettes, Mustangs, and European Exotics.
I hope this sheds some light on the differences between auto, home and specialty insurance policies and needs. We live in an ever changing world which places insurance companies in the position to keep up with what we are demanding as the insurable public. As we buy things, our insurance policies need to make sure the new thing can be protected adequately.
As manufactures introduce new or revised editions of the things we like, insurance companies need to make sure they are aware of these new things and changes and adjust policies to meet the new requirements. Golf carts have been moving from the golf course out onto public streets creating a new usage issue. That is one topic I avoided because insurance companies have not uniformly decided how to treat and insure these items. That is an example of new usage of an existing vehicle posing problems for insurance companies. If you ever have a question as to whether or not something should be insured, call your agent immediately.