What happens when you want to get car insurance for a vehicle with no book value — can you get collision coverage for it?
Often, the answer is yes. But it might not always make sense to do so.
Collision coverage pays up to the actual cash value (ACV) of a car when damaged in a covered event. Insurers use sites like Kelley Blue Book and others that provide used car pricing information to determine how much a vehicle is worth.
Before purchasing collision coverage, it’s essential to understand how it works, how much your car is worth, and how much money you might receive from the insurance company if you need to file a claim.
Collision coverage helps pay for vehicle repairs — up to the car’s current market value — if you’re in a crash. But first, you have to pay your deductible. For example, let’s say you have a $500 deductible and $2,000 worth of damage to your car. You must pay for the first $500 worth of damage. And the insurance company will pay for the remaining $1,500.
If the damage exceeds the car’s worth, your insurer will write a check for the ACV minus your deductible.
There are two main reasons a car may not have a book value — it’s too old, or it’s a custom build or classic car. No matter which situation you’re in, determining the car’s value can be as easy as plugging in your vehicle license plate number or the year, make, and model.
A new study shows that people drive cars longer, and due to many economic factors, used cars remain in short supply, pushing up values. So your used car’s book value two years ago could be hundreds, if not thousands more in 2021.
A few ways the insurance company can determine the ACV of an older car with no book value is by looking at the following:
Collision coverage for these types of cars gets written on a stated value basis. “The vehicle owner and the insurance company have to come to terms and say this is what we’re valuing the car at,” Raymond said. “No matter what happens, this is the valuation basis that we pay off of.”
The way the stated value is determined depends on several things.
The price you’ll pay for collision coverage varies widely based on multiple factors, including the value of the car you’re insuring, your driving history, age, the insurance company, and many more.
Page says that you might be able to get collision coverage for less than $100 a year on a car that’s only worth around $1,000. But Raymond says a policy still might cost you $800 to $1,200 a year, even for a low-value vehicle.
If you’ve got a custom build or classic, you’ll typically pay more because the car’s value is higher.
Whether it makes sense to insure a car with no book value depends on how much the car is worth, your insurance premium, and your deductible. If your annual premium and deductible costs are more than what the insurance company would pay if you file a claim, it may not make sense. But if you have a high-value vehicle, it’s probably worth it.
If you’re looking to get collision for an older car, “Be prepared to have reality hit you hard when you’re talking about valuation of your vehicle if it’s not a custom build car,” Raymond said. “Old cars are usually more valuable to the driver than they are to the market. It may be difficult to find physical damage coverage for those older cars.”
And even if you can find coverage, he often doesn’t recommend insuring it for physical damage. “Adding a policy could make it very cost-prohibitive,” he says.
But Page says that’s not always true. “Most [insurance] companies are fairly generous in terms of claims settlements with the Blue Book Value. If you wanted to trade your car in or sell your car to a private party, those values are going to be lower than what you would get from an insurance claim.”
Ultimately, the decision to get collision coverage is a personal one you have to make. “Our approach would be just to have a really honest and transparent conversation with the customer about the mathematical trade-off and how the claim would be handled and let them decide what financial risk they’re willing to assume,” Page says.
