Will car insurance cover my custom vehicle?

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Melanie Musson
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UPDATED: Mar 13, 2020

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People customize their automobiles for many reasons. They may add ground effects and hydraulics to make the vehicle more attractive, or they might install modifications that will improve the car’s performance. Others might need to customize a vehicle to accommodate a driver with disabilities. Whatever the reason behind a customized vehicle, these modifications raise important issues for insured drivers.

Auto insurance handles customized vehicles differently than their factory-based counterparts, and drivers who do not plan for those differences may be unpleasantly surprised by claim denials or other problems with their insurance. By understanding what your insurance company covers and why, you can make a smart choice about the type of coverages you buy and what modifications you put on your vehicle.

How Insurance Companies Relate to Customization

Car insurance companies are obligated to repair a damaged vehicle to its factory condition or, in the case of older vehicles, the condition it was in prior to the loss. In most cases, after-market modifications to vehicles are not covered at all. In situations where they are covered, the insurance company may charge a higher premium or require you to purchase additional coverages.

Any changes made to the vehicle that differentiate it from a factory vehicle will count as modifications that might require supplemental coverages. Here are a few of the most common modifications:

— Hand-controls, wheelchair ramps and other customizations for disabled drivers
— Custom paint jobs with unique colors or designs
— Hydraulics, ground effects, custom rims and other aesthetic changes
— Custom sound system equipment
— After-market GPS devices or other electronics

Even if you purchased the vehicle with these after-market additions, your insurance company will probably require you to purchase additional coverages.

Why Modifications Make a Difference to Your Insurer

Auto insurance companies determine the cost of policies based on two factors: risk and repair cost. If a modification increases a driver’s risk or increases the cost of repairs, the premiums will increase. For example, modifying a vehicle for high performance is often considered a high-risk activity because of the link between performance modifications and street racing or other risky behaviors.

Most increased insurance costs are related to the cost of repairs, not the increased risk posed by the modifications. Because not all repair shops are capable of handling repairs to custom, after-market additions, labor costs and the cost of parts themselves will be higher for these vehicles.

Looked at another way, two vehicles of the exact same year, make and model can be insured by a company. One vehicle has after-market customizations, whereas the other vehicle has exactly what the factory installed. If both cars are totaled out in auto accidents, the customized vehicle will cost more to replace due to the money that the insured put into it. Therefore, it must cost more to insure since the insurance company must compensate for its potential loss.

Buying Coverages for Modified Vehicles

When purchasing auto insurance, it’s a good idea to be up-front with your insurance company about any modifications that may be on your vehicle. The insurance company may not always ask about these things in advance or tell you that additional coverages are necessary unless you bring it up first. It’s always better to know in advance that your vehicle will be covered so that you are not left with a high repair cost after an accident.

If your vehicle has any special modifications, mention them at the time you purchase the policy. You may be asked to provide proof of the vehicle’s value or the cost of the modifications. Ideally, you will want to submit receipts for your modifications, but this is not always possible. In that case you may need to provide an approximation or have someone complete an appraisal.

The additional coverages may add substantially to the base cost of your repairs. Depending on your insurance company, you may be able to further customize your coverages for vehicle modifications. For example, you can have a modification protected against theft but not collision damage. You would agree to pay for collision damage to that component out of pocket. This will help keep your costs down while protecting you from a few important risks.

Because there is so much variation from one insurance company to the next in the way that these coverages are offered and billed, you would need to speak with the individual insurer to determine how much the policy will cost and what options you have available to you. If you’re purchasing a new policy, be sure to ask the insurance company about these supplemental coverages before you agree to a policy.

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