How do Millionaires insure all their cars?
Celebrities are well-known for extravagant spending habits. While some celebrities may build custom mansions or buy private jets, others collect rare and exotic cars. Celebrity car collections range from Jerry Seinfeld’s Porsche addiction to Jay Leno’s massive collection of vehicles from all time periods, but one thing remains the same: Each and every car must be insured.
In fact, it’s a point of pride for many of these car collectors that their vehicles are all kept in perfect condition and are road legal. Jay Leno, for example, drives a different car to work each day just to ensure that all of them are in perfect condition and get the attention they deserve.
Despite the rarity and value of the cars, celebrities may actually pay less to insure each car than the average American does. Most millionaires are able to self-insure their vehicles, and in their situation this is often much cheaper than purchasing an auto policy. Although some millionaires may carry policies with major insurance companies, they most likely pay to self-insure instead. Even if they carry traditional policies, their rates may be surprisingly low.
What is Self-Insurance?
Self-insurance essentially means that the vehicle’s owner has money set aside to cover the costs normally paid by insurance companies. This money must go toward liability expenses, repairs or replacements for damaged vehicles and medical expenses as necessary. Instead of relying on an insurance company to pay for auto accidents, a self-insured person is able to pay all of the expenses out of pocket.
In some states, anyone can be self-insured. State auto insurance laws require drivers to submit proof of financial responsibility, and this does not always mean an insurance policy; as long as the driver is able to submit proof of money set aside for claims, they might qualify as self-insured. For some states, this requires drivers to have multiple automobiles, while in others you must meet only a minimum limit of money set aside.
Because people with large car collections and substantial net worth can qualify for self-insurance, they can avoid paying monthly premiums. In fact, self-insuring becomes a better the more cars a person owns. A driver doesn’t need a separate stash of money for each vehicle; instead, all of the cars can share the same pool of self-insured funds. This makes adding a vehicle essentially free once a self-insurance account has been established.
Other Ways Millionaires Save on Insurance
Not all drivers choose self-insurance. In some cases, states will not allow it; in other cases, they may be better served by buying a traditional auto insurance policy from a major insurer. Even people who insure their car collections through traditional insurance companies most likely pay lower rates per vehicle than most other drivers. There are multiple reasons for this:
- People who can afford to insure numerous different vehicles can probably afford to maintain them and pay for minor accidents, which reduces the overall number of claims that they file.
- Car collections are usually kept in custom garages , safe from weather events, theft and vandalism.
- Even if someone drives each of their collector cars, they do not drive every car every day. This reduces the likelihood of any single car getting involved in an accident.
- Insurance companies may offer a bulk rate since customers with numerous vehicles are valuable customers.
- Even if a customer does not self-insure their vehicles completely, they can probably afford higher deductibles. Sharing risk with the insurance company in this way will reduce the cost of coverage.
Ultimately, vehicles in extensive car collections carry a lower risk than commuter cars owned by other people. Because a collector car is less likely to be involved in a major collision, insurance companies will be willing to charge less for coverage. This results in lower premiums.
Wealthy people do have different concerns when purchasing insurance. Although they may be able to buy an inexpensive car policy or even self-insure all of their vehicles, they may need to spend more money on personal liability insurance or umbrella policies that will protect them from lawsuits.
Just because a millionaire’s cars may cost less to insure does not mean that they’ll be any cheaper to fix. Indeed, replacing a totaled-out McLaren or Porsche can quickly add up, and even a very rich celebrity’s pocketbook will be devastated if a storage garage is destroyed. Although the risk is comparatively lower for the very rich, some claims can have a major impact on the driver.