Value definitions (Classic car insurance)
Market value, replacement value, restoration value - What matters?
You can easily spend more than 20.000 Euros on the restoration of an old VW Beetle - but will you get this amount reimbursed by classic car insurance in case of damage? In the field of classic car appraisals, imaginative but legally insignificant terms like sentimental value, sale value, or current value are still being used. However, there are only three values that really matter for claims settlement:
Classic and collector vehicles are usually insured based on their market value (agreed value). Market value describes the current value of the vehicle in the specialty market for collector vehicles, meaning that at the present time, this vehicle would be paid or sold for the amount determined as the market value. It is an average price in the private market that does not include value-added tax or dealer profit margin. Only in the case of rarely traded vehicles and models that are predominantly sold through commercial dealers, results from dealer sales as well as international auction results are included as net amounts. Market value forms the basis for insurance classification and premium calculation in the comprehensive coverage area. It is considered an agreed value.
Attention: The policyholder is responsible for regularly adjusting the insurance value! Otherwise, in the event of a claim, only the originally agreed value at the time of insurance inception will be reimbursed, even if it is no longer current and significantly undervalued due to the typical appreciation seen in classic cars (underinsurance). Therefore, the vehicle valuation should be updated at least every 2 years.
The replacement value is the amount that the injured party must expend in the event of an accident to promptly obtain a replacement vehicle of the same kind and value (principle of natural restitution). The value at the time of the accident is the reference point. In contrast to market value, this primarily takes into account commercial trade. Therefore, the replacement value always includes (partial) value-added tax and the usual dealer profit margin in the respective price range. Restoration costs or other previous expenses are not taken into account. The replacement value usually is the basis for settling a liability claim.
Restoration (Rebuild) value
The restoration value represents the sum of the acquisition and subsequent restoration costs of a vehicle - regardless of whether this price can actually be achieved on the market in a sale. It is therefore a purely mathematically calculated value that results from the addition of visible or documented investments. The difference from the market value can therefore be significant. The restoration value is particularly important in cases where a vehicle has been restored over an above-average period, is labor-intensive, and therefore costly to restore.