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Some of the Finer Points of the Appraisal Process

by Rick Beecoff

Published in Cruisin' New England (May 2002 issue)

 

It's finally Spring and your attention is most likely turning toward your antique or

collectible car. Choosing the right appraiser and correctly insuring and registering

your car will help you fully enjoy your hobby.

 

Appraising Your Appraiser

If you own an antique or collectible car, or are thinking about buying one, getting

an appraisal is an integral part of the process. An appraisal is a document that

assesses the value of your collectible, antique, or special interest car for insurance,

estate, tax related, diminished value, and of course, purchase or resale purposes.

 

The appraiser's job is to be as objective as possible in determining the value of your

car. No emotions on your part can influence the examination of your car. This can

be a tough call for many appraisers; the car might have belonged to a deceased

relative, or the cost of restoring your prized possession to it's original, pristine

condition exceeds the true worth of your car.

 

The appraiser's practical knowledge of basic car construction principles,

subassemblies, power train assemblies, interior, and exterior finishes, etc., as well

as an astute power of observation is required to perform this important job correctly

A good appraiser also has a encyclopedic knowledge of stock versus after market or

custom items, accessories, or finishes for any given vehicle. Along with all the other

required knowledge, the appraiser uses vehicle documentation, various price guides,

catalogues, auction, and resale data to help shape the dollar value placed on your car.

 

You can help make the appraiser's job easier in determining the true value of your

car if you retain all pertinent documentation, for example, receipts, bills of sale, and

maintenance, restoration, or customization documentation. The appraiser is doing

his or her job correctly if they're thoroughly examining the sale and resale history of

your car and documenting your car in photographs.

 

Don't fall prey to trying to gauge your car's value by looking at published price

guides or checking the local classifieds or auction results for similar cars. For a true

appraisal of your car's value, the appraiser must examine all the data about your

particular car, observe the vehicle, and research various price data. In some

instances, your appraiser will consult with other recognized appraisers or vehicle

specialists to assemble an entire package to make a final determination of your

car's value. Many times, your appraiser will consult various automotive reference

publications to give the appraiser a sense of your car model's history and

uniqueness.

 

While Massachusetts law does not specifically require that the appraisal be

done by a licensed appraiser, most, if not all, insurers require that a licensed

professional provide the appraisal. The rationale is that the appraiser should have certain

documented knowledge; an appraiser's license is proof of that knowledge. Insurers

requirethe appraisal document bear the seal of the licensed appraiser.

 

In Massachusetts, you may choose your own appraiser. Your insurance company can

furnish you with a reference list of appraisers, but it cannot insist that you use a certain

appraiser or appraisal company. Remember, it is not required that your appraisal be

performed by a licensed appraiser. However, you and your insurance company should

view a licensed appraiser as an individual who has the documented knowledge needed

to determine the accurate and fair value of your car.

 

When you start researching appraisers for your car, be sure to look for an appraiser

who is intimately involved with the hobby of antique car collecting. This individual is

better qualified to provide a valid value appraisal than an appraiser who spends the

bulk of his or her professional time writing damage appraisals for an insurance

company. Damage appraisers are qualified to perform the task, but not having an

intimate knowledge of the hobby, they are generally not inclined to thoroughly

research your car's true value.

 

Insuring and Registering Your Hobby

There are two major components to Massachusetts auto insurance: liability

coverage and vehicle damage coverage (collision and comprehensive). Liability

is a common sense concept; consult with your insurance agent or broker to make

sure that your particular policy provides for proper coverage in all liability situations

and contingencies. In Massachusetts and most other states, you must purchase a

certain level of liability coverage in order to register your car. Unlike liability coverage,

vehicle damage coverage is optional. Damage coverage protects your car in case of an

accident or theft.

 

If you purchase damage coverage, make sure your policy includes

proper levels of collision and comprehensive ( fire, theft, vandalism, and glass breakage)

coverage. Vehicle damage coverage is based upon the value of your car that was

determined by your appraiser. In the event of any kind of loss, this appraisal will

determine the underlying value of your car.

 

How many ways do you think there are to register and insure your antique car?

Surprisingly, there are four very different methods in Massachusetts. (Note that

other states have different registration and insurance requirements; be sure to

examine the requirements thoroughly.)

 

The first method is called normal actual cash value insurance and registration.

The value of your car for insurance purposes is determined by NADA (National

Association of Automobile Dealers) or other accredited price guides. Your

car's value is then adjusted to reflect mileage or wear and tear factors. This is

referred to as ACV or actual cash value insurance. Normal actual cash value

and registration is appropriate for most vehicles that are used as daily drivers.

In this case, vehicle values are predetermined by various price guides and are not

required to have value appraisals. There is no allowance made to add extra value

for a vehicle because for example, it is collectible. The ordinary usage of these

vehicles is not restricted other than what a particular insurer might require or place

limitations on (e.g., extra coverage and premium for inexperienced or newly licensed

drivers, etc.).

 

The second method is a called a stated value policy in which your car is insured and

registered based upon a statement of value (via an appraisal) in order to accommodate

extra value due to a custom paint job, accessories, or if the car is determined to have

extra collectible value. A stated value policy can accommodate newer as well as older

vehicles with no restriction of usage other than what an insured and insurer might agree

upon. The vehicle damage coverage in this type of policy and the premium charged

by the insurer is based directly upon the accepted appraised value of the vehicle.

Your insurer must accept the appraisal to set car value and to protect itself against

overstated value and possible fraudulent claims. Bear in mind that stated value

coverage does not guarantee that the insured will receive the full appraised amount

of the car in the event of a total loss. Depreciation and other factors, as determined

by the insurer, can affect a final settlement.

 

The third method is antique policy and registration. If you wish to register

your car via antique registration, your car must be 25 years or older, and will be

subject to various use restrictions as required by the Massachusetts Registry

of Motor Vehicles. You must submit notarized affidavits of use when you register

your car. (Other states have different requirements.) The vehicle damage coverage

for antique registration is based upon ACV as determined by your appraisal and

accepted as such by the insurer. Again, please bear in mind that the appraised

value of the car does not guarantee that the insured will receive the full appraised

amount of the car in the event of a total loss. Insurance companies can attempt to apply

use and wear depreciation to the settlement amount. Note once again that it is

Extremely important to have an accurate appraisal to make sure that your antique car is carrying the appropriate amount of insurance coverage for your car's value.

 

You cannot register and insure your antique car as such in Massachusetts by

relying solely on a stated value insurance policy. Your insurance premiums for antique

registration are based upon use restrictions and subsequent risk exposure to your insurer.

Pure antique insurance policies are significantly less expensive than pure stated value

policies. However, here's the catch: if you register your car via the antique registration

method, you cannot use the car as a daily driver and expect to be covered by an

insurer in the event of an occurrence or loss. Registry of Motor Vehicle stringent

regulations and your insurance policy specifically spell out when and how you can

drive your car. No exceptions are ever made to these rules.

 

The fourth method for insuring your car is called agreed value policies. Agreed

value policies offer vehicle damage coverage based upon the agreed upon value

of your car by you and your insurer, and by now you know that the value of your

car is best determined by a professional appraiser. An agreed value policy provides

the insured with full payment of the agreed value of the vehicle, with no depreciation,

in the event of a total loss. Because of this, it is extremely important to maintain

an up to date appraisal at all times. In the event that your car is worth more than

an outdated appraisal and insurance policy provides, a total loss will be paid only

on the outdated valuation. With agreed value polices, the age of your car must be

25 years or older, and like antique registration, there are restrictions of use and age

limitations for vehicle operators. Agreed value policies in Massachusetts are usually

restricted to antique vehicles only. In some cases, your insurer might have requirements

regarding the type of facility in which you can store your car or who may drive your car.

These requirements are usually accomplished by notarized affidavits that ultimately

Form endorsements to your policy. And, as with pure antique policies and registration,

agreed value policies are less expensive than more traditional policies.

 

Regardless of the method of registration or type of insurance policy, it is critical that

you and your insurer mutually understand and agree to all conditions of a particular

insurance policy. You must thoroughly understand all limitations of use and conditions

of coverage for your policy.

 

Because your antique or collectible car is considered a commodity, its value is

susceptible to regularly occurring pricing fluctuations. As such, it important to keep

your car's appraisals current with no more than a two-year lapse, and in some

instances sooner, if market or other price fluctuations dictate shifts in value.

 

I hope that I've clarified some of the finer points of the appraisal process and

guided you through the maze of insurance policy and registration methods. As

with any important process, you must seek out the proper guidance and counsel

that is offered by trained professionals. Remember that knowledge, as provided by

a proper and qualified appraiser, gives you the power to protect your interest in this

wonderful hobby!

 

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Rick Beecoff, owner of First Appraisal Service in Peabody, MA and an avid classic car

enthusiast, is a Massachusetts Licensed (No. 013727) Auto Appraiser specializing in

antique, custom, classic, and modern cars. He is also a licensed Insurance Broker.

You can reach Rick at rbeecoff@firstappraisalservice.com, or 978-531-4461.