How to Insure a Car with No Book Value for Collision

By Jennifer Brozic 09/22/2021 12:00pm

Insuring cars with no book value

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.

How Does Collision Coverage Work?

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.

Determining What a Car Is Worth When There’s No Book Value

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.

Old Car

A few ways the insurance company can determine the ACV of an older car with no book value is by looking at the following:

  • Market assessment. “They’ll scour Autotrader or other comparable sites — anywhere you can get used cars — and they’ll see what other cars like that have been selling for,” said Shane Page, president of Piedmont Insurance Associates, an independent insurance agency in North Carolina. Based on their research, the insurer will come up with a value for the car. “If it’s roadworthy and running, it’s probably worth at least a few bucks more than what the deductible is,” he says.
  • Stated value. In some cases, the insurance company may agree to a stated value, which means the insurance company takes the customer’s word for how much the car is worth. And it doesn’t get verified until there’s a claim.
  • Cost when new. In this scenario, the insurer determines the value based on the car’s worth when new. They use a mathematical algorithm that factors in depreciation based on the age of the vehicle. And the insurance company uses that to determine the value.
  • Appraisal. Depending on the company, the insurer may require you to get an assessment. “In most cases, there’s very little value,” said Robert Raymond, vice president of private client advisors with HUB International, a global insurance brokerage. “A lot of times, the older vehicles have either an emotional or sentimental value to the owner. They’re worth way more to the insured [than the insurable value of the car].”

Custom Build or Classic Car

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.

  • Original owner. If you’re the original owner or you built the car yourself, you likely have an idea of what it’s worth based on how much you paid for the vehicle or the parts to build it. If you built it yourself, you can estimate the value of your labor and add it to the cost of the parts. With that information, you can probably get an insurer to agree to a valuation, Raymond says.
  • Auction. If you bought the car at auction, the insurance company might accept the initial auction valuation.
  • Appraisal. If you can’t easily determine the value or prove what it’s worth, you might need to get an appraisal. According to Page, in many cases, owners get the car appraised when they buy it. And insurers can use that value as the stated value. “Usually, there’s a several-year window that they’ll accept an appraisal from,” he said.

How Much Does Collision Coverage Cost?

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.

Is It Worth Insuring a Car with No Book Value for Collision?

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.