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Modified Car Insurance -Everything you need to know

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Car enthusiasts often make changes to their cars to improve performance, create a custom look or give the vehicle a higher-end feel. In most cases, a customized car with aftermarket parts is perfectly legal, but you might run into some issues with your auto insurance.

Car insurers typically have allowances for the cost of covering damages or loss based on standard repair costs and factory parts. If you have an accident and your high-end custom rims and wheels are damaged, your insurance coverage may not be enough to replace or repair your beauties. In fact, your car insurance company may void your coverage if you've made changes to your car outside of the factory standards and didn't tell them in advance about the upgrades.

That's where modified car insurance comes in. You'll need special coverage for the aftermarket parts and upgrades you invested in to personalize your ride. Your options are fewer as far as custom car insurance companies go, but you do have some choices. Here's everything you need to know about modified car insurance.

What is a modified car?

A modified car is one in which changes in appearance, functionality or performance were made to the original factory vehicle. The question is, do you have to worry about finding modified car insurance if you tinted your windows and added a pinstripe decal along the side of your car? You may have to, or at the very least, tell your insurance company about the changes.

Most insurers don't classify levels of modification. Adding a cosmetic pinstripe or an aftermarket roof rack may be considered as much of a modification as dropping your car's suspension. That's why it's best to run any changes you plan on making to your vehicle past your car insurance company. They'll be able to tell you if the upgrade is covered in your current policy, if you need to modify car insurance or look at custom car insurance companies as an alternative.

Common car modifications

Some of the most common modifications include that may require modified car insurance include:

  • Chrome or custom rims
  • Chrome bumper
  • Larger wheels
  • Custom paint job
  • Custom interior
  • Tinted windows
  • Roof rack
  • Grill guard
  • Anti-roll bar or sway bars
  • Truck bed liner or pickup cap
  • Running boards
  • Accent lights
  • Floodlights/LED light bars
  • Spoilers
  • Wheelchair ramp and other modifications for disabilities
  • Tow bar or hitch
  • Bluetooth connectivity
  • In-vehicle WiFi system
  • Custom audio and/or navigation system
  • DVD system
  • Turbocharger
  • Fuel system upgrade
  • Dual exhaust
  • Lowered or higher suspension
  • Lift kit
  • Winch

Why do I need modified car insurance?

You may be surprised at some of the items on the list of common modifications, such as adding Bluetooth connectivity or a new audio system. Upgrading a car's stereo doesn't seem like such a big risk, so why the big deal? Your car insurance company wants to ensure they've made provisions for these pricier items.

Vehicles with extra improvements are seen as a higher risk by insurers -- they're more likely to get broken into or stolen. In some cases, they're also more accident-prone. Enhancing a car's performance is usually associated with driving faster. Car insurers worry about modifications related to racing or speed, both high-risk activities.

As for cosmetic or entertainment-related changes such as upgrading your car stereo, if your new high-end audio system and subwoofer are stolen or need to be replaced after an accident, they're bound to be more expensive than the standard stereo the car was manufactured with.

Special insurance considerations for modified cars: agreed value

If you have a good track record with your car insurer and made a couple of modifications to your vehicle, you may be able to modify car insurance by negotiating an agreed value upfront. Also known as guaranteed value, you can insure your car to for a pre-agreed amount, which you will receive in case of a total loss.

Agreed value car insurance costs more than a standard policy because you're insuring the car for more money than a similar model without the modifications would be covered for. Underwriting an agreed value policy takes a little extra work. You'll need to provide evidence that the car is worth the agreed value by showing receipts of the costs of the upgrades or modifications, photos and an appraisal or a valuation certificate from a professional. It will be worth the extra work in the end -- you won't lose money on your aftermarket improvements if your vehicle is totaled.

Not every car insurer provides modified car insurance or the option of an agreed-value policy. Here are a few insurers specializing in custom car insurance. If you're shopping for a custom car insurance policy, get a quote from at least a couple of providers to find the most affordable modified car insurance.

  • Allstate: Provides coverage for classic cars 25 years or older that are modified.
  • Esurance: Offers supplemental coverage of up to $4,000 for custom and aftermarket parts.
  • Grundy: One of the few classic and custom car insurance companies. Offers agreed-value policies.
  • Hagerty: Classic and modified car insurance specialist. Provides agreed-value policies or custom car insurance for vehicles with modifications over $10,000 in value.
  • Nationwide: Offers agreed-value policies.
  • Progressive: $1,000 in modifications is included if you have collision or comprehensive coverage. You can purchase an additional $4,000 in coverage for your modifications.
  • Safeco: For modified collector cars.

When in doubt, spell it out

Car insurance companies may cover the same items differently. It's best to review your car and make a list of any non-original parts you're aware of. Ask your insurer about the items and if they would be covered under your current car insurance or if they need to be disclosed or added to your policy.

As for any future modifications, ask your insurer before you make the modifications to decide if the upgrade is worth the possible extra expense and hassle. And once you make the customization, let your insurer know right away. If you don't, you may find yourself with no coverage after an accident or loss.