The harder your car is to replace or repair, the higher your premiums will be. Modified cars, or cars with added, aftermarket features, like suspension upgrades and turbochargers, will need special insurance to protect those non-standard upgrades.
You’ll pay a higher premium for car insurance for a modified car than for a basic model. However, in some cases, vehicle modifications may actually lower your car insurance premium if they add additional safety features to your car.
What is a modified car?
When it comes to car insurance, your car insurance company will consider your car to be in the same condition that you bought it in. But it’s your car, and you can do whatever you want to it: You can paint a dragon on the side, you can lower or raise the chassis, and you can get huge tires if you want. These are called modifications, and you can add them for aesthetic reasons or to adjust the performance of your car.
Modifications may not necessarily add value to your car, since they frequently void the car’s warranty, but they may make driving the car much more enjoyable. Mods can be as simple as installing a phone mount or as complex as replacing the engine.
Some common car modifications include:
Chrome rims or bumpers
Phone mount or Bluetooth connectivity
Turbochargers or turbo boosters
Stereo systems, subwoofers, CD or DVD players
What is modified car insurance?
Your basic car insurance policy may not actually cover your modifications at all, which is why you will need to purchase additional special coverage for your modifications.
Many insurance companies offer endorsements (or optional coverage) for aftermarket modifications, sometimes called custom parts and equipment coverage. This insurance covers repairing or replacing your customizations if they’re damaged in a car accident. Naturally, some mods don’t need extra coverage, like a $10 phone mount you installed. This additional coverage is for mods you can’t afford to replace out of pocket, like a stereo system.
If your usual auto insurance company won’t cover your car with its modifications, you may want to look into more specialized insurers. Frequently, insurers that offer coverage for rarer vehicles, like classic, vintage, collector, and performance cars, will also offer modified-car insurance.
If you're in an accident and your car is damaged or totaled, you will be reimbursed according to the original manufacturer version of your car.
That means, for example, that if you added $3,000 worth of modifications and did not purchase additional special coverage, you won’t be reimbursed that $3,000. Since you don’t have special coverage for your modifications, the modifications won’t be on your policy and therefore won’t exist in your insurer’s eyes, so you wouldn’t get reimbursed.
Will vehicle modifications raise my car insurance rates?
Adding additional coverage for modifications will almost definitely increase your premium, so make sure to discuss this with your car insurance representative. However, some auto insurance policies automatically have special-equipment protection built into the comprehensive or collision coverages. Check your policy or ask your agent, and make sure to get this info in writing.
Alternatively, you could decide not to drive your modified car at all; maybe it’s just meant to sit pretty in your garage. In that case, you could reduce your coverage to just comprehensive insurance, which would lower your premium but make it illegal to actually drive the car in most states.
Should you tell your insurer about your modifications?
Yes, you’ll absolutely need to declare your modifications to your car insurer, whether or not you risk paying a higher premium. That’s because if someone files a claim against you, your car insurance company may deny the claim if they find that the car was modified without their knowledge.
The insurance company will consider this a misrepresentation of your coverage, and you could end up paying the claim out of pocket, costing you tens or even hundreds of thousands of dollars.
In addition to making sure your claims go smoothly, declaring your modifications to the insurance company lets them know that, when you do file an insurance claim, you’re not trying to get more than your claim is worth.
Say your car is in an accident and you want to claim $5,000 in repairs to your car and $1,000 in repairs to the speaker system you added. The car insurance company may wonder whether the $6,000 claim is fraudulent if it wasn’t aware of the speaker modification. However, you’re unlikely to be reimbursed for a modified speaker system unless you specifically added custom parts and equipment coverage to your policy.
Agreed value policy
If you have a valuable modified car, you should make sure you have an agreed value auto policy. Also called a “replacement-cost policy,” this type of policy settles how much the car and the mods are worth.
Before you sign your policy, you will work with an appraiser and your insurance company to determine the value of your modified vehicle. Meaning the amount you will be paid out should you have a total loss of your modified car will be the agreed value between you and your insurer.
Agreed value policies could increase your premium, but they could save you money because this type of policy pays out the agreed value to replace your car if it is totaled, as opposed to the actual cash value (ACV), which is the value of your car as determined by your insurer.
Which insurance companies cover modified cars?
Some insurers offer endorsements that provide coverage for the modified parts of your vehicle. Some of those companies include:
PEMCO: A car insurance policy with PEMCO pays up to $500 for customizations for residents in Washington. Drivers also have the option to buy more coverage.
State Farm: State Farm will repair your modified vehicle with non-original equipment manufacturer (non-OEM), recycled, and OEM Surplus parts.
Progressive: Progressive pays to repair or replace up to $5,000 worth of custom parts and equipment like a stereo, custom wheels, and navigation system.
Esurance: You can add customized parts and equipment coverage to protect up to $4,000 worth of modifications, devices, and accessories.
Farmers: If you have comprehensive and collision coverage, you can add supplemental coverage for aftermarket parts to your policy.
If you own a vintage classic car, like a 1953 Chevrolet Corvette, some companies offer classic or collector car insurance to protect it, including:
Which car modifications can lead to discounts?
Some modifications can actually lower your premium, if the addition is made to increase your car’s safety and security. After making these customizations, contact your car insurer to see about lowering your rates if there are additional discounts they offer for security modifications.
Rearview cameras: In order to see what’s behind you when you’re backing up, and blind-spot detection
Anti-theft systems: Including alarms, GPS tracking devices, OnStar service, or a LoJack
Accident-sensor technology: Warning systems that sense slower-moving or stationary vehicles nearby
Daytime running lamps: Also called daytime running lights, which increase your car’s visibility during the day, and adaptive headlights, which enhances night vision
As counterintuitive as it may seem, safety tech features don’t always earn you a discount, even when they reduce your risk of getting into an accident. Some high tech safety features can actually raise your rates slightly since the parts are expensive to replace or repair, so you shouldn’t necessarily count on these discounts.