What Is Modified Car Insurance?

What Is Modified Car Insurance?
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When you sign up for a car insurance policy, you’ll be asked for the make and model of your car. If you’ve made modifications to your vehicle, that could affect the premiums and coverage options you’re offered because your car insurance company based them on the agreed value of your car. Whether your modifications happen before or after you’ve signed up for a policy, it’s important to be straightforward with your insurance company to avoid jeopardizing a future claim.

What Is Car Insurance?

Your auto insurance coverage is designed to protect you against unexpected events. In the case of auto insurance, you sign up for a policy and pay monthly premiums with the understanding that you’re protected against loss. That way, if you’re in an accident, your vehicle is stolen or there’s a weather-related incident, you simply file a claim, and your insurance pays for repairs or a replacement.

When you sign up for insurance coverage, you’re given a premium amount, which you can usually pay monthly, and a dollar amount for each type of coverage. If you do file a claim, the amount your insurer pays is based on that information. It’s important to closely scrutinize the policy documents, both when you sign up for the policy and with each renewal.

What Are Modified Cars?

A car insurance policy is issued based on the typical specifications of the make and model you’ve described. If you own a Ford Explorer, the insurer looks at the market value of that vehicle, as well as the safety record and likelihood of theft. Making changes to your Ford Explorer affects all of those things, potentially increasing the cost for the insurer to repair or replace it.

For that reason, it’s important to alert your insurance company to any alterations you’ve made to the original build. But small changes don't count, so if you’ve clipped a cellphone mount to the dashboard or dangled an air freshener from the rearview mirror, those changes won’t make your car a modified vehicle.

Here are some common customizations you need to report to your insurer:

  • Custom rims
  • Enhanced stereo system
  • Navigation system
  • New paint
  • Suspension upgrades
  • Engine boosters, like turbochargers and superchargers
  • Window tint
  • Security system
  • Upgrades to the seating

In some cases, your changes could earn you a discount on your premiums. Some, however, may up the car’s value or compromise safety, potentially leading to an increase in premiums. Either way, it’s important to be upfront with your insurer.

Why Alerting Your Insurer Is Important

If you’re planning to make changes to your vehicle that could impact its value, safety or security rating, it’s important to get in touch with your insurance company. They can tell you how much the changes will affect the value and safety of your vehicle. If the quote bumps your premiums up too high, it may force you to rethink the changes.

Choosing to make the changes without letting your insurer know can be costly. If you’re in an accident later and need to file a claim, your failure to disclose the changes could void your policy. At the very least, you could find that your insurer only pays based on the original value of the vehicle, even if your car is a total loss.

Types of Car Insurance

When looking at what modifications your insurance covers, first you need to make sure your own car is part of your coverage. It depends on the type of car insurance coverage you have. If you have only liability coverage, your car won’t be protected anyway, as this type of insurance only pays for damage you cause to other property or people with your vehicle.

However, if you have collision or comprehensive insurance, damage to your own vehicle is covered. This is where modified equipment coverage can come in. However, keep in mind that if your vehicle is damaged, the other person’s insurance probably won’t cover custom upgrades, especially if they’re particularly pricey.

Custom Parts and Equipment Coverage

Instead of upping the overall value of your car, some insurers have an endorsement that covers any car modifications. Usually, this is phrased as “custom parts and equipment coverage,” and it includes anything that wasn’t installed by the original manufacturer.

If your policy includes custom parts and equipment coverage, make sure you know exactly the types of modifications that are included. When insuring a vehicle, insurers are usually very specific about what they will and will not cover. Many insurers cover anything your dealer installs, special equipment like fog lights and running boards, custom wheels and tires, audio equipment and aftermarket seats.

Exotic and Luxury Car Insurance

In some cases, the vehicle itself is custom. An insurer usually has special coverage for custom cars like a classic vehicle or souped-up sports car, and that insurance often costs more than for more standard cars. A custom car may be at a higher risk for theft, have a higher value, be more expensive to repair and/or be less safe.

If you have an exotic or luxury car, it’s important to make clear whether it’s your primary or secondary car. A second car you rarely drive could be subject to discounts due to low annual mileage. You may also be able to get a discount by storing it safely in a garage.

High-Value Classic Car Insurance

In some cases, car insurance gets a little sticky because your car is worth more than the market value. This often happens with classic and antique cars, which can fetch a premium from collectors, especially if they’re rare and in good condition. But convincing an insurance company that the value is higher than they see in their data can be a little challenging.

If you have a classic or antique car, look for specialized auto insurance from an insurer that understands the unique needs of classic car owners. They’ll be able to set your car's value where it needs to be. If you only drive the vehicle to car shows, you may want to check into insurance that covers you only for that, which can be cheaper than being insured for full-time use.

Insurance Claims and OEM Parts

Even if you’ve done no modifications that impact the value of your car, you may find your other repairs don’t return your vehicle back to its original condition. Insurance companies have been known to request aftermarket parts be used in repairing a wrecked vehicle, rather than the pricier original equipment manufacturer’s (OEM) parts. If an accident knocks off your side mirror, for instance, you may find the one on your vehicle is not up to the original manufacturer’s exact standards.

In most cases, an aftermarket part will work just fine. However, those who tend to invest in car modifications are often picky about the parts that are attached to it. If you’re concerned, contact the insurance agent handling your claim. Sometimes you can insist on an OEM part and the insurer will agree.

A modified car can easily be insured, as long as you let your insurance company know that you’ve made the changes. Then if you do need to file a claim, this ensures that your policy covers the accurate value of your vehicle. If you do have a claim, be aware that your insurer may have a tough time replacing the upgraded parts with a part of identical quality.