Do I need special auto insurance coverage if I add features to or modify my car?
The answer is, "yes."
Whether you plan to do a custom paint job or add a major modification like a supercharger, customizing your car can have automobile insurance ramifications. According to the Specialty Equipment Market Association, consumers spent a whopping $36 billion in 2014 on automotive specialty equipment parts and accessories. If you're enhancing your car, you may be wondering:
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Modifications a standard policy will/won't cover
Vehicle modifications or customizations (the terms are often interchangeably used in the industry and basically mean the same thing) not made at the factory, as well as aftermarket parts, are typically excluded from standard policies. Some insurers regard an automobile as "customized/modified" when the chassis, body and/or frame are structurally modified, the car's performance is considerably augmented, or the value of a custom paint job exceeds several thousands of dollars.
"An auto insurance company generally does not provide any coverage for enhancements to an automobile. The exception is tires and rims — for which you will need to furnish receipts, and even then only a portion of their value will typically be reimbursed in a loss settlement," said Christopher Paradiso, owner of Paradiso Insurance, who adds that vehicle value is typically based on the factory-installed components of the vehicle.
The coverage you need for customizations
Although a standard policy won't reimburse the value of a customization if you need to file a loss claim, the good news is you may have two options:
- Supplemental Coverage: Many insurers offer endorsements that provide supplemental coverage for modifications and aftermarket components. For example, Esurance offers optional customized parts and equipment coverage that will pay up to $4,000 if those parts or equipment are damaged or need to be replaced. Depending on the insurer, the premium for this extra coverage can equate to approximately 10% of the value of the modifications.
- Classic/Collectible Car Insurance: If the insurer doesn't offer this type of endorsement or the coverage limits are inadequate to protect your investment, you can seek coverage from a carrier that specializes in insuring collectible/classic automobiles (which includes modified cars) — including Hagerty, J.C. Taylor, Condon Skelly, Grundy and American National.
Insurance considerations before modifying your car
Determined to move ahead with a majorly tricked out ride or even a minor modification? Consider these suggestions first:
- Read your existing policy thoroughly to understand coverage exclusions and exceptions.
- Consult with your insurer. "Let your agent know if you plan to make changes to your vehicle at any time before or during the policy term," said Kristofer Kirchen, president of Tampa, Fla.-based Advanced Insurance Managers, LLC.
- Ask for clarifications in writing. To ensure that your modifications are properly covered, ask your agent to clarify any confusing policy language and request that confirmation in a written letter, email or document. Your insurer is obligated to honor whatever its agent promises you in writing.
- Don't hide a customization from your insurer. "If your car is worth more after being modified and you are involved in an accident and the car isn't insured for the right amount, you will only be paid for the car based on its original amount, as the losses weren't originally priced in the policy," said Loretta Worters, vice president of the Insurance Information Institute. Even worse, your insurer may cancel/void your policy and deny the claim because you didn't disclose the customizations, which can be considered a "material misrepresentation" for which they can legally drop you — leaving you on the hook for paying the loss out of your own pocket.
- Ponder cost and risk factors carefully. Even if your insurer covers you, this may result in a higher annual increase in your premiums.
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Examples of popular modifications that drivers make to their vehicles, and which usually require supplemental or separate insurance, include:
- Custom paint job, murals, graphics or decals
- Electronic equipment like a custom stereo, PC, TV or video system
- Custom tires, wheels or spinners
- Custom spoilers, louvers, scoops or grilles
- Speed enhancements like turbochargers, blowers and strokers
- Anti-roll/anti-sway bars or winches
- Added chrome
- Accent/auxiliary lights
- Suspension enhancers/hydraulics