Classic car owners are passionate about their vehicles, keepingthem as showroom pieces in their homes or driving them around tocatch people's eyes. Whether kept indoors or occasionally driven,however, these vehicles need to be insured against everything fromwater damage to collisions.

While cheaper to insure than standard vehicles, classic cars hasestimated annual premiums of up to $2 billion and is a great nicefor independent agents and brokers to break into.

Here are 12 important facts about Classic Car coverage for bothinsureds and agents alike.

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1) Coverage Is Cheap. The premiums for Classic& Collectible Car coverage are much cheaper than Standard Autopolicies, with most insureds paying just 25-33 percent of what theywould for a comparable policy on a daily-drive vehicle. Forcollectors with just a single classic car in the garage, worth inthe mid-five figures, an average premium is likely to be in the$200-$400 per year range, depending on the liability requirementsof the state where the insured resides.

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2) Limited Use Expected. The reasons for thesubstantially lower rates are twofold. First and foremost is thatusage of these cars is expected to be strictly limited to specialoccasions—they are not meant to be used for the daily commute ortaking the kids to soccer practice. But in addition to usagerestrictions, another factor helps keep premiums low: Insureds tendto take very good care of their cars, treating them more like apainting—or beloved family member—than a mode of transport.

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3) Agreed Value Policies. Another keycharacteristic of collector-car coverage is that policies areAgreed Value, not Actual Cash Value. Markets that play in the space willhave a range of valuations they will accept from clients based onthe make and model of a car. Clients whose proposed valuations aremuch higher would need to have the car independently appraised.

“In many cases, we know more about the values and trends inpricing than the owners do, so we'll work with them to ensure theyget adequate coverage,” says McKeel Hagerty, CEO of HagertyInsurance.

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4) Indie Agents: Find Business at Car Shows.For independent agents and brokers looking to break into theClassic Car niche, one of the best bets is to attend a local eventfor enthusiasts of the hobby. Ron Fiamma, vice president/directorof private collections for the Private Client Group division ofChartis, estimates there are 10,000 car shows every year—from thepopular “Concours d'Elegance” in Pebble Beach, Calif., “to ahandful of guys getting together in a McDonald's parking lot.People are so passionate about their cars that it's easy for abroker to stroll around and use an icebreaker like asking howsomeone got started collecting. With only a limited amount ofknowledge, a broker can infiltrate this market pretty easily. Youdon't have to be an expert.”

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5) Racing Excluded (with One Exception). Somecarriers allow collector cars to hit the track in very specific andcontrolled circumstances—basically for a leisurely spin around thecircuit. But all carriers exclude actual racing—with one bigexception. Six months ago, Chartis made available a new,nonadmitted, physical-damage endorsement “as an accommodation totop clients who race,” says Fiamma.

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6) Common Claims. Many classic car claims stemfrom incidents that occurred on the insured's own property. “Manyclaims have nothing to do with collisions, but are related tostorage issues—something falls in the garage or there's flooding orrodents or a hazard from construction going on next door,” saysHagerty. Engine fires are another frequent source of insurerpayouts, as well as water-damage and flying rocks when a car isbeing transported.

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7) “Rat Rod” Submissions. Rising. One widelyseen trend is an increase in insurance submissions for “rat rods,”heavily modified vehicles that harken back to the designs of 1950shot rods. The insurance challenge: finding an accurate value. Thepros: clients often fix the cars themselves.

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8) Billion-Dollar Market. Just how big is theClassic & Collectible Car niche? No one is quite sure, withestimates of annual premium ranging from $500 million to $2billion—although the majority of industry experts feel $1 billionis a pretty accurate estimate.

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9) Good Investments. While an unabashed love ofclassic cars is what really drives collectors to spend millions oreven tens of millions on the hobby, the purchases often prove to begood investments as well. Indeed, given the low returns on moretraditional investment plays, some underwriters report collectorcars are becoming even more popular these days as buyers view themas a way to park money in a relatively safe investment—while alsogetting a lot more enjoyment than what a stock or bondprovides.

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10) PURE Opinion: An Argument for Combining Regular,Classic Cars. It is highly recommended for high-net-worthclients to combine both classic cars and regular-use vehicles onone policy, according to Martin Harlet, COO of PrivilegeUnderwriters Reciprocal Exchange (PURE), a specialty insurancecompany that provides customized insurance to high-net-worthindividuals. “By insuring classic cars as part of a personal-linesaccount that includes regular-use vehicles on the same policy, theinsurer has a clearer picture of vehicle usage, resulting inbroader coverage for the insured. Other advantages include theefficiency of maintaining one agent, carrier, policy and bill forall cars as well as savings, including the potential benefits toyour regular-use automobiles through multi-car pricing.”

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11) Giant Auto Insurers Play in This Space,Too. Auto-insurance giants are also playing in the classiccar space. Among them is State Farm, whose Antique policies are forvehicles at least 25 years old, and its Classic policies are forcars at least 10 years old and produced on a limited basis.Physical damage is on a stated-value basis and usage is restrictedto exhibitions and parades, resulting in low liabilitypremiums.

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12) Repairs Can Trump Replacements. Oftentimes, repairing a damaged classic car can cost less than replacingit. A Chartis client drove his Ferrari Enzo—one of 400 made—into awall, deeming it a total loss. But the client refused payment,requesting he wanted the car back. Chartis paid to send the car tothe Ferrari factory in Italy for repairs, and flew the client toItaly twice to oversee the work and test the repaired vehicle onFerrari's track. Writing a total-loss check would have cost Chartistwo-thirds as much.