Monday, October 25, 2010

Maintaining Liability Insurance on Stored Vehicles


Hobby cars can be a lot of fun.  But seasonal use vehicles still need to maintain liability coverage in many States, unless you cancel or surrender the license tags.

Having a seasonal or hobby car can be a lot of fun.  And if approached right, it can be an inexpensive hobby.  The key is to not overspend or "take it a step too far".  The "ultimate" hobby car might be the dream of every car enthusiast, but it also would be a nightmare of expenses for most middle-class people.

So saving money is the name of the game - and it is a game for some, and kind of fun.  Tracking down and finding old parts for a car - on a budget - can make it worthwhile.  Doing your own repairs and restoration is also part and parcel of the deal.  And watching expenses is also key.  Car insurance and registration are two of the larger expenses for such cars.

For cars 20 years and older, in many States, you can put "historic" or "antique" tags and insurance on your car.  Consult your local DMV and/or insurance company first.  In some States, the use of the vehicle may be severely limited to car shows, parades, driving to the mechanic, and "occasional pleasure use".  If that would restrict you from driving to work, then don't get historical or antique tags.  Similarly, with antique car insurance, your coverage may be limited as well, and as a result, if you get in an accident while using the car in a non-authorized manner (e.g., commuting to work) you may find you are not covered.

For those reasons, I shied away from "antique" insurance, although I did have historic plates on one car.  And yes, I was "hassled by the man" - twice - for driving the car in a "non-conforming use".  For a simple Cop on the beat, the idea that you could be driving a car for pleasure use during "working hours" didn't compute for him.  But of course, I don't keep regular "working hours".  The punchline, at least in Virginia at the time, was that there was no enforcement mechanism for "non-conforming use" of antique or historical tags.  In other words, he couldn't give you a ticket for it.  The best he could do was call an investigator from Richmond to see if the tags should be revoked, and of course, Richmond has better things to do with their time.

So historic or antique tags can be a hassle.  And antique car insurance may leave you not covered.  I would not recommend either, unless you have a car you really very rarely drive.

For older cars that are not worth a lot, like my 1997 BMW pictured above (recently sold for $6500) one way to save on money is to drop collision and comp.  As I noted in a previous posting, for cars worth less than $10,000, this can be a money saver, particularly a car driven only a few thousand miles a year.  The odds of the car being "totaled" are slim, and if you can afford a hobby car, well, you can afford to walk way from it if it wrecked.

Frankly, you should be in a position to walk away from anything parked in your driveway.  If your car is worth so much that you have to borrow to buy it, and have to insure it lest its destruction ruin you financially, then I suggest you own too much car for your income bracket.  Nothing parked in your driveway should be that big a percentage of your overall net worth.

If you have a seasonal car, when you store it in the winter, you can remove collision (if you have it) and save money.  But be careful, when you call the insurance agent, make sure the brain-dead "assistant" doesn't take the liability off as well!  In most States, you have to keep liability on the car if it is tagged, or you face some steep fines.

How steep? In New York, on the order of $8 per day, jumping to $15 a day after 30 days.  Georgia has a fine of about $150 for a first offense, and then it nearly doubles every time after that.  Clearly, the intent is to prevent people from driving cars without liability insurance, which is a good thing.  But the car hobbyist can find themselves in a bind if their agent drops the liability by mistake (as happened to me once, which is why I switched to GEICO).

Compounding this problem for me, was that the DMV had the wrong zip code on my registration, so I did not receive the notice from the DMV, resulting in a ticket as well.  Ouch! Needless to say, I corrected the address on my registration and changed insurance companies.

This also happened to a friend of mine in New York, who left the country for a time, and their insurance lapsed.  They figured (wrongly) "Hey, no worries, we aren't driving the car, so we don't need insurance!"  But the truth of the matter is, if you have tags on it, you have to have liability insurance, or you get fined.  And they got a nasty letter and an $8 a day fine when they got back.  Lapse in insurance coverage can also raise your rates considerably, so it is not a good idea to let it just go dark without thinking this through in advance.

In addition, when you sell a car, it is temping to call the insurance company and drop your coverage.  However, you could end up on the receiving end of a nasty letter and/or fine from the DMV if you do not cancel your registration or surrender your plates.  In most cases, if you can show the car was sold, they drop the matter.  But it is better to avoid problems by canceling the registration or surrendering the tags, whichever is required in your State.

And never, ever, leave the tags on a car when you sell it, as a "favor" to the buyer so he can drive it home.  As I will detail in another posting, this can go horribly wrong.

In New York and many States, you have to go to the DMV and surrender the plates.  However, check with your local DMV first, as laws change over time.  In Georgia, surrender used to be the norm, but now you can "cancel" your registration over the phone by calling your local license office and giving them the tag number, your name, and vehicle description.

In Georgia, you can CHECK the status of your registration and insurance online at: http://onlinemvd.dor.ga.gov/vinstatuscheck/vinstatus.aspx which allows you to type in your VIN number and it will display the status of both registration and insurance.  For more information on Georgia insurance and tag requirements, see: http://motor.etax.dor.ga.gov/motor/insurance/

By the way, most DMV sites have similar pages, but it can be hard to find, as the navigation on government websites is anything but easy.  But it is there. It took me 20 minutes to find those links above on the Georgia site.

Once you have confirmed that the registration has been canceled (and I would print out the statement from the DMV site or get other hard copy confirmation) you can remove the car from your policy.  GEICO allows you to do this online, which is very convenient.

Like with anything else, it pays to know the rules if you want to avoid getting burned.  And sometimes, the learning curve is very steep and painful.  Relying on others to guide you and help you can be problematic, as if they are brain-dead assistants to an insurance agent, they might not give you very much in the way of useful advice.

As we have seen in every other area of finances, knowledge is power, and if you lack knowledge, you end up getting screwed - or at least fined!

1 comment:

  1. Since most States require you keep liability insurance on the car if it is registered, you cannot remove liability insurance unless you surrender the tags.

    For your seasonal-use car (the old Corvette you keep in the garage) this is problematic. Do you really want to surrender your tags every year and then go re-register the car in the Spring? Didn't think so.

    Also, if you want comprehensive insurance, your insurance company is generally going to require liability insurance as well.

    So the savings start to dwindle.

    This is why a "hobby car" can be a very, very expensive hobby. And I say this from firsthand experience, having owned six cars at a time.

    I could "afford" it, in terms of cash-flow. But the dent to my net worth was well in excess of $100,000 in terms of depreciation, insurance costs, repairs, and the like.

    Cars are like fresh fruit - they need to be driven and used. Hobby cars are fun and all, but don't kid yourself that they are collectible or that you are going to "make money" on them as they appreciate over time. You aren't.

    Even a very old or rare car, which appreciates over time (and that is NOT you 1982 Camaro, sorry!) will appreciate in value very slowly - often less than the costs involved in keeping it.

    It is a hobby - an expense. If you enjoy it, great. Just don't kid yourself about the costs involved.

    How many "poor" people have one or more "hobby" cars parked in their barns, garages, or yards? And they can't figure out why they are poor.

    ReplyDelete

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