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CAR INSURANCE INSIGHTS

A customized car with aftermarket parts is perfectly legal, but you might run into some issues with your auto insurance. That's where modified car insurance comes in. Here's everything you need to know about modified car insurance.

Modified Car Insurance

Car enthusiasts often make changes to their vehicles to improve performance, create a custom look or give their ride a higher-end feel. In most cases, a customized car with aftermarket parts is legal, but you might run into some issues trying to get a standard auto insurance policy that covers such upgrades.

Fortunately, modified car insurance can provide the coverage you need. It is special coverage for the aftermarket parts and upgrades you add to personalize your ride. Here's everything you need to know about modified vehicle insurance.

KEY TAKEAWAYS
  • Ask your insurer whether your current insurance policy covers the upgrade to your car or if you need to modify car insurance.
  • Your standard auto insurance policy will not cover modifications like custom rims or an enhanced stereo system.
  • If you have a good driving history and made a few modifications to your car, you can make changes to your insurance by negotiating an agreed value upfront.
  • Agreed value car insurance cost more because you're insuring the vehicle for a higher price than any other vehicle without modifications.

What is a modified car?

A modified car is one that's been customized with unique bodywork, functional upgrades, or improved performance. If you tint or otherwise modify your windows, install a pinstripe decal, or add a hitch, tell your insurance company about these upgrades so they don't charge more than what is necessary for coverage, and they can appropriately update your insurance policy to reflect the changes.

Different insurance companies handle vehicle modifications in different ways. Adding a roof rack to your car may be considered as much of an upgrade as dropping the suspension. That's why it's best to discuss any potential upgrades with your insurance company — they can let you know whether your current policy covers the change or if you need to explore different car insurance companies as an alternative.

Do I need modified car insurance?

Modified Car Insurance

If you have spent even a modest amount of money modifying your car – and your standard policy does not cover those changes – you likely should purchase modified car insurance. The more you have invested in the car, the more compelling the argument for purchasing this coverage.

Here are some things to think about when deciding if you want modified vehicle insurance:

There are modifications standard auto insurance won’t cover

Insurance companies typically will not automatically cover modifications you make to your vehicle. For example, Esurance states that standard auto policies only cover the original equipment included by the manufacturer. That is true even if you have comprehensive and collision coverage.

Esurance notes that improvements such as custom rims or an enhanced stereo system would not receive coverage under a standard policy. Other auto insurers have similar rules. What does – and does not – qualify for coverage is likely to vary from insurer to insurer.

The coverages you need for your custom car

To make sure your insurance company covers your modifications, ask your agent what type of policy changes you might need to make sure you have some form of modified vehicle insurance.

Insurers may sell something along the lines of customized parts and equipment coverage. Progressive notes that this type of endorsement to your auto policy typically will reimburse you for damages to changes and upgrades you have made to your car. Examples might include:

  • An upgraded stereo system
  • A navigation system
  • Custom wheels
  • A new paint job

Such coverage typically has a limit of around $5,000, according to Progressive.

If you have a souped-up custom car that mostly sits in your garage, you may want to talk to your insurance agent about a custom car insurance policy. Nationwide notes that “custom cars” aren’t meant for everyday use, so they can be less of a risk to insure.

In fact, Nationwide says classic car insurance can be up to 42% less expensive than a standard auto insurance policy.

Consider an agreed value policy

If you have made a couple of modifications to your vehicle but have a good track record with your car insurer, you may be able to modify car insurance by negotiating an agreed value upfront. Also known as guaranteed value, this allows you to insure your car 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 you would a similar model that does not have such modifications. 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.

Best car insurance companies for modified vehicles

Many drivers want to modify their car for aesthetic or safety reasons. Insurance companies that specialize in modified vehicles can offer more coverage options, like roadside assistance and rental reimbursement. If you're considering modifying your vehicle with a different body kit, new wheels, larger tires - the list goes on - make sure it's covered by insurance before going through with any installation work!

Here are some examples of auto insurance companies and the kinds of modified car insurance they offer:

  1. Allstate: Provides coverage for classic cars more than 25 years old. Hagerty underwrites these policies.
  2. Esurance: Offers supplemental coverage of up to $4,000 for custom and aftermarket parts.
  3. Grundy: One of the few classic and custom car insurance companies. Offers agreed-value policies.
  4. Hagerty: Classic and modified car insurance specialist that offers agreed-value policies or collector and classic car insurance.
  5. Nationwide: Offers agreed-value policies.
  6. Progressive$1,000 in modifications is included if you have collision or comprehensive coverage. You can purchase an additional $5,000 in coverage for your modifications.
  7. Safeco: Offers classic car insurance with agreed-value policies.

Frequently asked questions about custom car insurance

What is considered a car modification?

The definition of a modified car can be broad. A vehicle is considered to be modified if it has had any alteration that changes how the car feels, looks, drives and functions compared to the standards set by the car’s manufacturer, according to Tatum Insurance, an independent insurance agency that writes policies in Oklahoma, Texas and Arizona.

Some of the most common modifications 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 Wi-Fi system
  • Custom audio and/or navigation system
  • DVD system
  • Turbocharger
  • Fuel system upgrade
  • Dual exhaust
  • Lowered or higher suspension
  • Lift kit
  • Winch

Are there modifications that can get me a discount on my car insurance?

While most modifications are likely to increase your car insurance rates, a handful of modifications might cause your rates to fall.

For example, if you add anti-theft devices, they could make your vehicle harder to steal. Theoretically, this lowers the risk to your insurance company and could lower your rate.

If I am in an accident, will car insurance cover my custom roof rack?

It depends – that is why you should inform your insurer about any modifications you make to your vehicle. Or better yet, consult with your agent before you make any changes to make sure they will be covered.

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. For example, 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.

Do I need to tell my insurance company about my custom modifications?

Yes, you should inform your car insurance company promptly about any modifications you make to your vehicle.

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.

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.

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