Got a classic car, like a 1960s-era Mustang or a gull-wing Mercedes? You could be paying too much to insure it.

Roughly half of classic car owners put their collectible vehicles on a standard auto insurance policy without realizing that they could be paying too much for inadequate coverage, said Ford Heacock III, chief executive of Heacock Classic, a Florida-based insurer of antique and collectible cars.

"A lot of people who are into car collecting as a hobby might not be paying attention to things like insurance," he said. "They just call their agent and add the car to their policy."

Or maybe you inherited Aunt Mabel's Chrysler 300 and are unaware that policies for collector cars even exist.

Insuring a classic with a traditional auto policy is a mistake for various reasons, Heacock said.

For one, traditional insurance is based on the notion that a car's value will decrease over time. But a classic car is likely to appreciate, especially if you're restoring it. You don't want to get a depreciated value if something happens to your pristine 1967 Jaguar XKE, he noted. But if you have a standard policy, that's generally what you'll get.

When buying a classic car insurance policy, which is offered by dozens of specialized insurance companies throughout the country, you and the insurer both agree to the car's replacement value. That price will be based on your assessment of the car's value and the price the car has brought at auction and in collector's sales. If the car is destroyed, you'll get that agreed-to value without having to dicker about depreciation.

It may seem counterintuitive that the premiums would be lower on a policy that provides a higher replacement cost. But the reason is simple: Classic and collectible cars are pampered (and driven infrequently and carefully).

"At the heart of insuring classic cars is the idea that this is your baby and you are not going to do anything to hurt it," said Candysse Miller, executive director of the Insurance Information Network of California and an avowed car buff.

How much cheaper is classic car insurance? The answer varies widely based on the insurer and vehicle.

A State Farm spokesman said it might cost $470 annually to cover a 1968 Camaro with a traditional policy -- with a lot of caveats. (Specifically, the driver had 30 years of experience, multiple discounts and a perfect driving record.)

State Farm would cut that rate by about 20 percent to $380 annually if you mentioned that it was a collectible car and that you planned to drive it mainly to shows and to show off, said State Farm spokesman Bob Devereux.

Heacock's classic car insurance company would charge even less for similar coverage -- about $290 -- and wouldn't even inquire about the specifics of your driving record.

Why? Because State Farm uses dozens of factors to price your policy, while Heacock has a simpler model. They're mainly looking at the car's value and how it is going to be used. Heacock explains that if you're driving it solely in parades and to and from auto shows, the chance of getting T-boned on the highway -- or slamming into another driver -- is pretty slim. Continued...