Lotus Elan owner finds insurance to be inadequate! WARNING

[atthelimit]

I am often asked through the forum to offer advice and help on insurance matters and I have been contacted by some one I know and who has owned his S4 Elan from new, a one owner car!

Imagine the horror then that the car should be involved in an accident recently whilst taking part in a Lotus club touring run. The owner was at fault, brain fade as he freely admits, but after 160k miles of which nearly every single one has been driven by the owner I think he can be forgiven. But this momentary lapse in concentration brings the matter of the insurance claim sharply into focus.

The car has been insured for many years on an ?agreed value policy?, the problem is that all those years ago the value of ?10K seemed reasonable to repair/replace the car. It is by no means a cat walk concourse car but is a well used, very original un-molested example. Today?s values of course are a different matter and with mint cars fetching ?25k or even exceptionally ?35k it has had the effect that ?ordinary? cars or even basket cases command high prices and at ?10k, this car is sadly under insured.

As stated this is a well used beast, it has done all those miles on its original engine which has been rebuilt a number of times, it is on its last bore before liners are needed etc, it is on its second chassis and so on. But the fact is that this car has been enjoyed to the full and used firstly as the new sports car and now as a cherished car used for club events etc. The car is well loved, well used and is as you would suspect after 40 years of ownership a ?member of the family?. But it is a complete original car with matching numbers, mechanicals, interior, badges and it wears its age and mileage with pride.

The damage is front end, it has tweaked the chassis and so a new chassis will be required. Labour is the biggest cost and for the grafting on of a full front end, rectification of any related stress cracks/damage occurring from the accident, replacement of a few damaged parts, headlamp vacuum pods, servo etc and of course preparation and paint together with a complete chassis change, the estimate for repairs is circa ?13,000. The actual parts required only total around ?3500 or so, the rest of course is made up of labour costs and the governments bit, VAT. This would suggest that the garage are quoting around 275 man hours for the job. It may sound a lot but actually that?s one man working on it for 34 days at 8 hours a day. Could you rebuild it any quicker, could you do it to a very high standard and guarantee your work afterwards?
The reality of course is that there will be more than one man working on it and the turn around will be less than a month but it shows you just how expensive it is to repair these cars if you can?t do any of the work yourself.

So where does it leave this poor chap and his insurance claim. Short is the simple answer!
The insurers could just give the owner a cheque for ?10K. In his policy ( a saving grace in this scenario) he does have the first option to buy back the salvage from the insurers if they write the car off, which brings us to the next point, how much is the salvage worth?
On well known auction sites you will see large sums paid for original badges, crash pads, centre consoles, pillar trims, under dash trims etc, then onto a complete engine with all ancillaries, gear box, diff, Mick Miller drive shafts etc to say nothing of those craved for items like Chapman signed steering wheel, original washer bag etc. So what price will the insurers ask for this, if we were to say ?3k would that be far of the mark? If you were to offer me a complete, running, still driving (just) car needing a chassis and a front end who here would not be tempted at ?3k. So we have ?10k -?3k = ?7k to the client and a repair bill of ?13k.

The client is negotiating with the insurers at the moment to allow him to do most of the mechanical work, i.e. the chassis change, the owner will take the opportunity to replace worn bushes, bump stops, dampers, brake lines and so on and he is willing to pay for these items himself but in the process he will of course be saving the insurers some of the labour charges. The body will go off to be worked upon and then the built up chassis will be delivered to the body shop to be married together. Final completion of the work will be carried out by the owner in the hope that he can retain the car he has owned for 40 years and at a cost that he can afford. There will be much hard work involved and skinned knuckles along the way but this is a cost and undertaking he is prepared to accept in order to hang on to the car. Thankfully he has the skill and knowledge to be able to do this himself, others might not be in the same position.

This could have been avoided if the client had increased his valuation on his car over the years, but this car is like an old pair of slippers, comfortable if not a little shabby round the edges and something that has been taken for granted as he has the insurance policy. He has never had any intention of selling the car and so the value of it has been somewhat "notional" to him. The insurance might have cost a little more to increase the value but it would have been a nominal amount and the other option might have been to include reinstatement cover to the policy if available which increases the amount insures allow for repair of the car, usually an uplift of 25% or in some cases 50% subject to payment of an extra premium. I would suggest that you all have a look at what your car is insured for and decide if that is reasonable, or in light of current values consider if it needs to be increased! This is the ?downside? of an agreed value policy, it is agreed at the value when the policy is taken out and if market conditions change it is up to the owner, not the insurer to take action. In the main these policies work well and indeed should be the policy of choice but in volatile markets you need to keep on top of market trends, who 2/3 years ago would have predicted Elans at ?25K or even higher? This is a sorry tale and one that should teach us all a lesson!

Kim
Abbot Insurance (Vendors page)

[paddy]

Thanks Kim for this warning and detailed analysis.

So who would you advise we go to for a written valuation that the insurance companies will want to see?

In my case, the valuation simply came from my original purchase receipt.

Alternatively, is it possible to have an "agreed rebuild value" instead of simply an "agreed market value" ?

Paddy

[GrUmPyBoDgEr]

Indeed an interesting case Kim.

There have been several mentions of Elan values on here in the recent past, which you will be aware of.
I think that it was every 2 years that my last Insurer demanded fresh Photos & Valuation for my S4.
The initial Valuation of 15K has remained the same for a long time which is something I'll have to consider when I re-insure.
As mentioned before higher Valuation is a two edged Sword, maybe the owner was interested in keeping his Premium to a minimum but in this case that saving will take a lot of offsetting with the hefty Bill waiting around the corner.
One Hurdle with well used Cars would be getting a sensible Valuation I imagine?
Most valuations are done on the basis of a series of supplied Photos & if the Car is not "Sparkly" enough the Valuer may not be prepared to go very high on the estimate.
Lots of Food for thought & thanks.

Cheers
John

[69S4]

An interesting account and (apart from the accident) something that just about mirrors my situation. A well used but fundamentally sound Elan that I have no intention selling and with an insurance valuation of ?10K that came from a magazine listing for private sales. I would imagine one of the dealers would have a larger price tag on it in their showroom but that's not what I'd end up with in my pocket if I sold it. What point in the market represents an insurance valuation I suppose is what I'm asking. A straight cash sale to a dealer or that necessary to cover a professional rebuild from a front and rear end shunt?

In the past having first refusal on buying back the wreckage used to be straightforward. Fix it yourself at zero labour cost and put it back on the road. These days though all damage is catagorised and various hoops have to be jumped through to put a severely damaged car back on the road - if it can be done at all. For something modular like the Elan with some bits like the paintwork having a huge labour input with minimal safety implications it would be easy for the insurance company to write off a mechanically perfectly sound car just because the paintwork was too expensive to rectify. Buying that back and brush painting it with emulsion for the time being would seem to be a good idea but the car would then be tagged with an appropriate insurance classification that may well invite subsequent refusal by brokers. I freely admit to not knowing much about the murky world of insurance, assume I'm not going to have any call on their services over the next year and usually take the easy (cheapest) way out. Maybe Kim or someone could pick up on these points.

[bcmc33]

Every year my insurer (Carole Nash) sends me a "pay-up" renewal demand that includes a blank valuation sheet. This sheet I take to Paul Matty, and for a ?10 donation to his pet charity, he fills the form with his estimate of what he would sell the car on his forecourt. This is the basis for the 'Agreed Value' I have with Carole Nash.

[Galwaylotus]

Every year my insurer (Carole Nash) sends me a "pay-up" renewal demand that includes a blank valuation sheet. This sheet I take to Paul Matty, and for a ?10 donation to his pet charity, he fills the form with his estimate of what he would sell the car on his forecourt. This is the basis for the 'Agreed Value' I have with Carole Nash.

Ok. Good idea. What do those of us across the pond do? It's a bit pricey and time consuming to bring our cars back to the UK to get them re-valued.

[bcmc33]

Every year my insurer (Carole Nash) sends me a "pay-up" renewal demand that includes a blank valuation sheet. This sheet I take to Paul Matty, and for a ?10 donation to his pet charity, he fills the form with his estimate of what he would sell the car on his forecourt. This is the basis for the 'Agreed Value' I have with Carole Nash.

Ok. Good idea. What do those of us across the pond do? It's a bit pricey and time consuming to bring our cars back to the UK to get them re-valued.

Talk to PM, perhaps something could be arranged with a set of photos and a full description.
Otherwise, let us know when you come over and we can go for a pint, or two.

[stugilmour]

Excellent analysis and interesting discussion.

Will be going through the agreed value process shortly when I get on the road. The way it works here is I have an initial value based on purchase price and imediate repairs to get on the road. I have to get an independent appraisal done at my cost when I am finished the rebuild. Going rate here is about $100 or so. I have to get the appraiser from a list provided by the insurance company. I also need a mechanical inspection for registration, similar to the MOT I expect. Cost for this is about $130. Not sure yet if I just have to accept the appraised value or can modify/negotiate value.

Not sure, but I think Haggerty in the US allows flexability in the agreed value amount. I expect they put a reasonable limit to it so cars don't mysteriously burn in a market downturn.

I think classic car appraisers are availble all over NA if you want a valuation done at your cost.

[Gordon Sauer]

My insurance in US is through Heacock and it's based on a book value--for my +2S130, lots of money in it, only comes to insureable at 12K. They said I could get it appraised--about $350 I've found, but unlikely would raise it much. Regarding totaling a classic--my 1972 Citroen SM (cutting edge like Lotus but in other areas!) was covered under unisured motorist through my policy and when my insurer called around to sell the whole car, he was only offered 1K--lucky for me to buy it at that. So while the cars part out for alot, as a wreck for somebody to take whole, it may not be so valuable. Anyway, seems hard to move insurers into what we "think" the car should be worth and agreed value seems a bit of a misnomer. Gordon Sauer

[atthelimit]

Hi all,

Following on from a couple of the comments made.

1) Sorry about you guys outside of the UK can't help you with insurance out there, it's bad enough just keeping on top of things here! Values across the pond will differ from values here but there must be some specialist with sufficient knowledge to offer some kind of valuation service?

For the UK............

I don't think its as drastic as getting formal valuations at this stage. Just be aware that when renewing your insurance you need to check that the value you have got on it represents what it would cost you to buy a replacement. The way that values are rising can catch you out. If you simply ask to increase the value to keep pace with ther current market values I cannot see it being too much of a problem I would state the reason you are doing it when you write to them. Insurers are aware that values / prices are on the increase, and as proof you only have to look at some of the sheds that have sold for very strong money on E-bay. Having said all that a proffesional valuation is never a bad thing but obvoisly there is a certain amount of hassle involved and normally a cost as well.

Classic insurance is very cheap anyway and any increase in premium moving form say 10k to 14k will be a nominal amount. So whilst it is a "double edge sword" as John put it, it is not a huge obstacle and as the example shows, it much better to pay an extra ?15/?20 now and be ok if you have an claim rather than be several thousand out of pocket!

Someone else had queries surrounding the law and write offs. Whilst it is true that insurers are bound by certain rules surrounding write offs the issue is a lot less problematic in the case of most Loti. Being modular, i.e. separate chassis, seperate body, readily available mechanicals it is almost possible to rebuild (at a cost) a Lotus in any state. The worst case would be a large fire where there is little or nothing left to rebuild, yes you can buy a new body, new chassis but what about the engine, warped and cracked blocks and heads are just a step too far, you would not be rebuilding it, you would be building a new car. There is a point though at which you have to ask yourself, would I want it back? Would it not be better to take, the (hopefully) adequate settlement cheque and search for a replacement. Top cars are out there, thats why Paul Matty and the like has no problem selling them. There are some dogs as well, let the buyer beware and all that.

But engines aside there is no reason why a car needing a new chassis and full replacement body should be written off unless it is just down to economics. But remember this is about economics and not heart and sentiment that we as owners invest in our cars. Insurance is a bottom line business just like anything else and if the insurers best interest is to write it off at say a net figure of ?12K they are not going to pay ?13k, ?14k, ?15k to repair it. If the sentiment is worth the difference to you then as in the case cited you buy the salvage and get the spanners out.

The insurance policy is there to "place the client back in the position they were in before the loss" This should be remembered when considering the value of the car, the value is what you would have to pay to replace the car with one of the same spec and condition, not what it might cost to repair, that is not the same thing. If a stone hit the radiator and the engine boiled and siezed the repair bill might come anywhere from ?5K to ?10K. But once repaired the car would not be worth 10K more! We also know that in many cases the money spent in restoration often exceeds the market value of the car. You spend the money because you want to, its your hobby, your passion but if it were your business you would not spend 25K on a restoration knowing that you could only sell it on at say ?20k would you. Insurance is no different, it is a business.

Someone wrote that they "normally take the easiest (cheapest) option and just renew the policy". Well we are all guilty of a bit of aparthy at times but it can prove costly, the example cited was not driven by a desire to save ?20 in premium just that they have taken the "easy option" over the years. You spend a lot of time tinkering, coseting and maybe even driving your classic, just spend a little more time just once a year when it comes to the insurance. Don't begrudge paying an extra ?20 for getting the right cover you need, not what is cheapest. (Sorry that sounded like a bit of a sermon then)

For Paddy, when did you buy it? Is it now worth more or less than you paid for it? If its now more, even if you have done nothing to it then ask them to increase it to a more realistic value.

It's not all doom and gloom.
I bought my Elan 30 years ago, it cost ?2,100, yes Ive spent money on it, no, I would not consider it to be a concourse car, tidy yes, well used yes but the fact is the car is now worth in my humble opinion somewhere around ?17k-20K. I am happy to pay the insurance premium based on that value in the secure knowledge that I could buy a tidy Elan for that money. I keep on top of everything but there will come a point when I grow too old to drive it or some catastrophy strikes and the car would have to be sold, so I for one am greatfull that Elan prices are going up and the minimal if increasing cost of classic insurance is there to protect my future pension fund or more likely carehome bill!

Kim

[live_ade]

It's my understanding that club lotus will do a valuation based on photos, example documentation & a current MOT.. this may be available overseas.

[simonknee]

Thank you for this thread

I talked to Club Lotus today about the value of mine. I insured it on Peter James for ?12K when I put it back on the road. Turns out it is worth ?16K for insurance replacement. This is pending sending four photos (2x 3/4 shots, 1 interior, 1 engine). Plus a copy of my records and recent receipts, MOT and V5.

In the meantime I called Peter James and for ?24 the market value is now ?16K. Doesn't mean I would get this if I total it tomorrow but it increases the maximum I could get.

Apparently I was still assuming prices were much about the same as 5-8 years ago.

A very nice surprise. The Lotus has made me poorer and richer at the same time

[neilsjuke]

Have found Classic line very helpful with cover for my Lotus Cortina valuation whilst being restored and when I need to add a driver to the Elan's cover they did it for free , also track day cover.

http://classiclineinsurance.co.uk/


Neil

[SADLOTUS]

Neil! this is a Lotus forum not a TOYOTA forum!


....now you'll change it and my comment will look daft!

[neilsjuke]

Thanks Paul now get back to some work or are you still on the Isle of Wiget singing LA La La etc
Neil