Lucky Dog Racing League Endurance Car Insurance Primer
Here at Traction we’re amateur Lucky Dog racers, just like many of our clients. You probably already know that buying insurance for a race car isn’t necessarily like buying insurance for the car you drive back and forth to work in. In some ways it’s not like even buying weekend car or collector car insurance, it’s in a category all it’s own.
What makes it so different? There are a number of ways, but one of the biggest is that racers tend to take more equipment and tools with them when going to track than the typical enthusiast. Even compared to the typical weekend track day enthusiast or auto-crosser, racers often have more to consider when it comes to insurance because of all of the spare parts, tools, safety equipment and more.
In this primer we’ll dive into the basics of car coverage, which depending on your familiarity with agreed value insurance may or may not be a refresher, as well as some of the endorsements and unique risks racers tend to encounter.
Endurance Car Insurance Terminology Mini Primer
First, let’s review our car insurance terminology. If you’ve never cared about the nuance between liability, comprehensive or collision, then insuring an endurance car is a good reason to pay attention to the details.
We do want to note the first part of this article is reviewing fairly standard definitions. We’ll get to what types of policies cover what, where, and when as it pertains to endurance cars – i.e. on track, off track at home, on the trailer, etc. For now, we’re just trying to lay some foundational terminology that will matter.
Note this is not intended to be an exhaustive list, we’re hitting the major points that are relevant to the larger discussion on the type of policy you may need.
Liability
When you see numbers like 100/300/100 – those are communicating the limits of liability in your policy. It’s important to remember that liability pays the other party you cause damage to. It does not cover damage to yourself, passengers, vehicle or property. Only the other parties. The first 100 is $100,000 maximum per person of bodily injury. The $300,000 is maximum limit per incident and the last 100 is $100,000 maximum for property damage.
If you have liability only- that’s all your insurance company is going to pay for. Damage to your car, injury to you or your passengers is not covered. Again, just because you have a policy with liability does not mean you have liability coverage everywhere. Most street driven policies will exclude liability on track, and on track liability policies will not extend coverage on the street.
Also, an important factor for endurance cars is that if you intend to register and drive your car on public roads, in most states, on street liability is the type insurance required by law (and generally validated at registration by the DMV).
Medical Payments
Medical Payments Coverage is what you need if you want the insurance company to cover medical bills for you and the passengers in your car. You are not required by law to have it and you may be tempted to skip Medical Payments coverage if you have individual health insurance but please note how this coverage differs:
#1: In many cases, this coverage is available 3 years after an accident regardless of fault.
#2: Medical Payments covers funeral expenses for you or any of the passengers in your car (health insurance does not).
#3: This coverage insures you and your family if you are involved in an incident with a car as a pedestrian.
#4 This coverage applies even when you are driving a vehicle you do not own (such as a borrowed or rented car).
It should be noted that any injury you sustain while racing or engaged in a “speed event” will not be covered by your standard Medical Payments coverage in most instances.
Uninsured and Underinsured Motorists
This covers you and your passengers if there is damage caused by a driver who does not have insurance, doesn’t have enough insurance, who left the scene of the accident or if the insurance company for the person who caused the accident denies their claim.
We also want to talk about the two common types of uninsured or underinsured coverage. They are generally known as “reduced by” or “added on”, though they may also be referred to as “stacked” and “non-stacked”. That is beyond the scope of this article, but definitely read the full terminology primer if you are not familiar with the difference between reduced by and added on (aka non-stacked and stacked).
Collision
This is the insurance that covers the damage to your car if it’s damaged in an accident with another car or object (such as a tree) or overturned when you are at-fault, partially at fault (shared-fault) or in some cases, not at fault. Please note: Accidents involving animals are not covered by collision insurance, for that you need comprehensive.
For racers, there are a number of things to be aware of besides just whether your collision coverage is for on track or off track, there is also the question of what is covered. Your insurance company may not cover engine, safety or even cosmetic modifications.
Comprehensive
Some insurance companies are now calling this coverage Other Than Collision. This covers things that happen to the vehicle such as fire, falling objects, theft, vandalism, flood, contact with a bird or other animal or glass breakage (unless caused by collision). This coverage covers you when you’re in your car or when you’re in a rented/borrowed car.
Personal Property
Anything not permanently installed is generally not covered by collision or comprehensive. While this may mean your laptop or cell phone for most insurance policies, for racers this can include: tools, spare parts, personal safety gear (i.e. helmets, gloves, shoes).
Loss Settlement Type And Valuation
Next, before we get into policy types, lets talk about loss settlements. While most insurance blogs and conversations center around what is covered, loss settlement determines how much will my insurance company pay in the event of a loss.
While any type of payout or loss can involve a loss settlement type, for most race car policies these concern the amount paid for comprehensive and collision claims.
Insurance Value Settlement Types – A Primer
First, let’s cover what the common insurance settlement types are. There are generally 4 commonly accepted settlement types:
- Actual Cash Value
- Stated Value
- Replacement Value
- Agreed Value
Replacement value is more commonly found in builds and structure insurance, both personal and commercial. However, when it comes to personal automotive policies you generally will only find three of these types used. Though, that doesn’t mean every insurance company offers all three. In fact, many insurance companies only offer one of the three.
We’ll briefly touch on the difference between 3 you are most likely to encounter below. Also, stated value and agreed value (along with the term “declared”) are often used interchangeably. However, they are absolutely not the same thing.
Actual Cash Value
The most common type and generally the loss settlement used for most traditional insurance policies. With Actual Cash Value, your insurance company generally uses a third party service that will tell them the cash replacement value of your vehicle (minus deductibles and fees). While you can disagree with the value, you’ll likely need to prove the value of the vehicle.
Stated Value
With stated value you declare the expected value up front. While this sounds great, your policy will generally then read “you’ll be paid the LESSER of the stated value or the actual cash value amount.”. Stated Value can be great for declaring the value of a vehicle that has modifications or anything that may increase the value of the vehicle (such as market trends) when determining the cash value. What’s important to note that just because it’s stated, doesn’t mean your insurance company is obligated to give you that amount.
Most insurance carriers will have some conditions or qualifications for stated value policies, although they are generally more flexible than agreed value qualifications.
Agreed Value
With agreed value you negotiate a value, and you and your insurance company agree this is the value in the event of a loss settlement. While agreed value has it’s advantages, like being subjective, it can also be more difficult to qualify for, particularly on street driven policies. Once this valuation amount is set, it is contractually guaranteed.
Most true race car insurance policies that cover cars as race cars will be written on an agreed value basis. It’s also generally considered the best, but does have qualification requirements. We touch on some of these further down in the article.
Common Endurance Car Policy Types/Offerings
Now what we have some foundational terminology out of the way, let’s talk about the standard race car policy types/offerings or solutions, along with some the variations generally available on the market.
Street Driven
Street driven policies are targeted at endurance cars that are tagged and registered for driving on public roads. In most states a minimum level of insurance is required to register and tag the vehicle. We won’t get into registration issues here, but these topics should generally apply whether you register the vehicle in your home/garaged state or registered state (Montana, Washington, etc.).
Liability Only
Liability only is just what it sounds like. It’s generally the minimum allowed coverage to register and drive your car on public streets. As we describe in our primer, if it’s only liability coverage then you’d have no coverage for any damage that was not the fault of another party. This includes while in storage at home, on the trailer, in the paddock or on track.
Also most “on street liability” insurance is a different policy than “on track liability”. However, both of those types of policies would not cover any damage to your own car.
Liability only is often the route many endurance car owners will take just to get the minimum liability on their traditional insurance company, with the idea being the insurance company may not ask too many questions.
Also, this is often thought of as the “cheapest” option. While it may be inexpensive, it may surprise you to learn that a limited use full coverage policy from a race car, enthusiast or collector company may actually be just as cheap, or even cheaper, while providing superior coverage.
Full Coverage
Full coverage, though a bit of a misnomer, means you have liability, comprehensive, collision and uninsured motorist protection. These “4 main coverage categories” generally provide standard 360 degree protection for your car. This would include liability for others, damage you cause (collision), damage from other causes (comprehensive/other than collision), damage from a non-insured/underinsured party (uninsured motorist).
Partial Coverage
While less common, some insurance agents and providers allow select coverages. For example, comprehensive + liability, but no collision.
Storage/Trailer/Paddock aka Off Track
For endurance cars that are not driven on public roads or registered, your standard race car policies are generally one of the following that cover some variation of the car in storage, on the trailer, or in other locations. What is covered will depend on the type of policy.
Comprehensive Only Policy
Comprehensive only policies are also known as “storage only”. These policies literally are the comprehensive portion of your policy only. They generally cover the vehicle while in storage at the primary garaging address. It generally covers perils like fire, theft and accidental damage (while not moving) – think something like a tree falling on it.
Storage, Trailer and Paddock Policy
The next type of policy is often called Storage, Trailer and Paddock. Though it’s also known as Limited, Trailer and Paddock, Race Car or Comprehensive Only with Race Car Endorsement depending on the company offering coverage.
This one has a lot to unpack. First, because the names all can be very misleading. For example, Storage, Trailer and Paddock (STP) and Limited Trailer and Paddock (LTP) mention “trailer”. However, these policies only cover the car on the trailer. The trailer itself requires additional coverage. Also, in some states they may be sold as STP or LTP, but they may only offer comprehensive coverage. Confusing, right?
Regardless of the marketing terminology used for these, most of these policies are different from full coverage or comprehensive only in that they have comprehensive and some level of collision coverage, but no liability. They are not designed for cars registered or driven on the street. And in most cases, you cannot do “dual coverage”, where you have liability insurance through a traditional insurance company and then a specialty storage, trailer and paddock policy.
Generally all of these variations will cover the car for fire, theft and accidental damage in storage (comprehensive), but also cover collision incidents such as an accident while on the trailer, loading or unloading from the trailer, and even accidental collision in the paddock. Generally speaking despite the terms “race car”, “race car endorsement”, etc, none of these policies will include on track coverage.
Also, these policies generally do not include any kind of liability or medical payments coverage. So if you hurt someone loading or unloading the vehicle, these policies will offer no coverage to you or a third party.
What Other Coverages May I Be Interested In
Permanently Installed Modifications
Whether your modifications are covered or not will depend on the type of policy. With a traditional insurance policy you can sometimes add coverage up to a certain dollar amount. However, this often caps out at $5,000 and it can generally add a fair bit to your premium.
Most enthusiast or collector policies with stated value or agreed value will cover permanently installed modifications. Most race car friendly companies will even cover permanently installed safety equipment, like roll cages if it’s included in the value.
Personal Safety Equipment
Your personal safety gear could cost hundreds, or even thousands of dollars. Particularly when traveling, theft is a concern. Several insurers offer an endorsement that will cover personal safety equipment if stolen or destroyed in a covered accident. This coverage is generally only available as an add on, and not as a standalone policy.
Trailers
Many racers don’t have separate coverage for their trailer because they read their regular insurance policy covers trailers. Unfortunately, that is usually only a few thousand dollars of coverage. So unless you have a beat up open decked trailer, chances are you may not have enough coverage. Also, trailer coverage only covers the trailer. It does NOT cover the vehicle on the trailer, or equipment stored in it.
Still, most companies that will cover race cars will offer optional coverage for the trailer itself. And it’s usually pretty inexpensive.
Tools
As racers we need to bring tools and equipment to the track. In some cases, thousands of dollars worth. We may also store it in the trailer while traveling. Generally none of these policies will cover tools and equipment away from home, even in a secured trailer, without an additional policy or endorsement.
While at home (or in the primary storage location), many companies include some coverage for tools and equipment automatically.
If you need coverage for tools on the go, some carriers offer it as an an endorsement. But in most cases for higher value tool sets you’ll need a separate policy.
Spare Parts
Just like tools, racers tend to have lots of spare parts. And if you endurance race you may have a almost a whole separate cars worth of spare parts. Those parts, like tools, may also be stored in the trailer while traveling. Generally if the part is not already installed on the car, your race car will not cover spare parts away from home/primary storage location, even in a secured trailer, without an additional policy or endorsement.
While at home/in the primary storage location, many companies include some coverage for spare parts. It will be important to know the limits though and ensure you’re properly covered. If you need coverage for spare parts on the go, some carriers offer it as an an endorsement or separate policy.
Track Clean Up
If you’ve ever left enough of a fluid spill to get charged by the track, you know how expensive cleanup can be. Many of these race car coverages have an optional endorsement that will provide coverage for track cleanup fees.
Track Damage
What you generally will not find in any of these policies is coverage for track damage. In fact, most track day insurance policies don’t cover track damage either. And track damage can easily cost thousands of dollars.
Liability coverage for on track is available, but it’s generally not a trivial policy to buy for competition events. It’s also fairly pricey. There are absolutely circumstances where a policy like this would make sense and we’re happy to discuss further details with you.
On Track Coverage For Physical Damage
Getting damage/collision coverage for your race car is pretty easy for testing/non-competitive track time. You can just buy a track day insurance policy. Track day insurance policies from some carriers will even cover certain forms of timed events, like time trials.
For physical damage coverage during competitive events, that will require a different kind of policy. That generally enters the realm of race team which is available as a custom policy that covers liability and physical damage. As mentioned above, insurance for competitive events require significant insight into the teams experience, future planned events and car setup to execute but may be worth it in some circumstances.
What Are Some Problem Areas Covering A Race Car
Not All Insurers Want Race Cars
While many racers just “don’t tell their insurance company” that their Miata is race prepped, and it likely works as long as you don’t have a claim, that’s always going to be a risk. First, your traditional insurance company would likely not cover you if they knew the car you are insuring is fully race prepped, even if it’s a liability only policy.
The good news is, for most race cars there are companies that will let you insure your car fully knowing it’s a race car. Many (depending on the type of car, mods and risk level) will even let you have liability coverage and drive it on the street.
Can I Be “Dropped” For Having A Race Car?
Could your current insurance company “drop” (non-renew or cancel) you if they found out your car was a race car or race prepped? Short answer, is yes. In most states, a race prepped or car driven on a race track would be considered a valid reason to not continue covering the car, or even potentially you cancel you in some situations.
Will they? That may depend on how well the insurance company is doing and how good of a customer you are. Right now it’s a bad time for insurers, so they are actively looking for reasons to get unwanted business off of the books. It’s possible that if you declare you race or drive on track, or you have a claim at or near a racing facility that your insurance company will actively seek to non-renew you.
In addition to the potential for savings, getting the right coverage and covering modifications on your race car, if you get insurance designed for race cars you reduce the chance this will happen.
Storage Requirements
If you want to qualify for the lower premium motorsports policies with agreed value, there may be storage requirements. While a garage isn’t always required, you should be aware of a few common restrictions.
Outside Shared Storage
The following are generally NEVER allowed: parking lots, parking decks, street parking. If you need insurance in any of these situations you generally have no choice but to get it from a traditional insurer and you likely will not qualify for agreed value coverage. With some carriers you may not even be able to qualify for stated value coverage.
Outside/Partially Enclosed Storage
The following are allowed for low or moderate value cars in most states, depending on the carrier: driveway, yard, car port. In trailer storage is also available. Vehicles over $50,000 may not be allowed any or all of these storage types. Generally race cars over $100,000 would never be allowed to be stored like this.
Also it’s important to note that outside or partially enclosed storage is not typically accepted in higher risk states or areas like California and Florida, particularly coastal areas.
Enclosed/Secured Storage
Garage, inside a rental storage unit, car condo, shared car storage and other fully enclosed, secured and private storage is ideal and generally required for higher value endurance cars. Though not all carriers will accept all storage types, even if they are enclosed.
Higher value endurance cars (over $100,000) may require private storage, even if it’s enclosed and secured.
Underwriting Requirements
Most endurance car insurance policies will require a process called underwriting. This is where an insurance professional will assess your individual risk. This is generally required on all agreed value policies, and many stated value, race car policies.
Most endurance race car insurance companies require documentation on the storage, how the value was determined and even what your daily driver is. Each of these speaks directly to the risk evaluation.
Most endurance race car insurance companies are going to be more picky about who they take. While this trade off makes it a little more work to get this kind of insurance, the benefit is the potential for better coverage, saving money or both is worth the effort.
Non-On Track Policies Provide No Coverage
And we don’t just mean your liability, comprehensive or collision coverage. Umbrella policies, medical payments, business insurance. Pretty much any type of insurance that does not explicitly coverage racing activity likely excludes it. Whether it covers you, or protects your assets, you likely are not covered for what occurs on (or sometimes even at) the race track.
Not Just For Endurance Cars
While this article is really about covering an endurance car, this kind of enthusiast/motorsports/collector coverage is useful for a lot of different types of insurance purposes.
The agreed value coverage is ideal for any classic, modern classic, exotic, race, track, show, lowriders and just about any other modified or unique car. Though it is generally only available to vehicles that are not used regularly for commuting or errands and where there are other cars in the household.
Traction Can Help You Navigate
Traction is an insurance agency that helps car people navigate coverage for race and track, as well as other specialty, collector, modified or unique car insurance needs. Since we enthusiasts and racers ourselves, we understand that car people need different solutions that are not always available to, or within the capabilities of, traditional agents. Traction provides a full suite of insurance products aimed at serious enthusiasts.
The agency offers enthusiast and collector insurance, coverage for exotics, unusual or hard to place kit cars or replicas vehicles; storage and trailered only policies for show and race cars; on track insurance by the day, event or year; motorsports insurance; excess liability policies on and off track and so much more.
Traction is available to any kind of car enthusiast but focuses on those who have deep rooted passions in their cars or automotive hobbies. Traction is available in a growing number of states. The products and services are provided through key underwriting and managing general agent partners.
For Information Purposes Only
The information in this blog post is intended to be for general information purposes and not considered direct insurance or legal advice, even if we make a recommendation. Our goal here is to give you something to think about. Every insurance situation is unique, and different states have different rules and laws governing these areas. Our attempt here is to talk in general terms and provide basic, common information.
Please be sure to talk to a license insurance agent before making any decisions or making any changes to your policy based on information you heard, read online or even have seen in this blog post. It may not even be that the information is bad or wrong, it just may not be specific enough for your situation.
Not all coverages, products or offerings are available in all states or situations. Nothing in this article should be considered a guarantee of insurability or an offer for coverage.
