The warm summer weather often means automobile enthusiasts modify their vehicles. While they often invest plenty of time and money on their cars, they often neglect the insurance implications of these modifications. Let’s take a look at which types of modifications are covered, and which aren’t.
Modifications Aren’t Part of Standard Policies
Insurance companies cover hundreds of thousands of vehicles, but very few vehicle owners are automotive enthusiasts. Even fewer modify their cars. Consequently, you need an insurance expert to tailor your policy for proper coverage.
Possible modifications include custom paint jobs, modifying the chassis, frame, or body, and increasing performance. Other modifications include adding chrome bumpers or wheels, racing tires, custom lighting, and stereo equipment.
It’s always best to check with your agent before you decide to modify your vehicle, because you may need to change or update your policy; which can affect your premiums. Modifications may increase the value of your vehicle and insurance risk.
Policy Language Requires Expertise
All insurance policies include conditions, exclusions, and sometimes exceptions to exclusions. Broad exemptions such as “racing parts” are reason for concern, because the policy does not define what they are.
To add to the complexity, each insurance company decides whether they cover a modification, or not. Insurance company requirements for coverage may also include specifications to qualify for coverage such as limiting annual mileage or storing the vehicle in a locked garage.
Insure Through a Knowledgeable Agent
Additional coverage is only beneficial if it restores your vehicle to its previous condition if you experience a loss. If you want coverage for a custom paint job, your agent must ensure your policy pays for a new custom paint job, not just repainting the vehicle. Use an agent who specializes in modified/specialty vehicles so they can tailor your policy to include the actual cost of a custom paint job, or other modifications.
You cannot rely on a basic policy, because it only pays out “actual cash value” if you make a claim. Insurance companies determine this amount based on the age of your vehicle, the mileage, its condition, and the average retail price. It does not take the value of your modifications into consideration.
Your insurance agent will probably recommend an “agreed value” or “stated value” policy, which allows you to insure your vehicle for a dollar amount that takes all of your modifications into consideration.
Report Modifications to Your Agent
Make sure to report all of your modifications to your insurance agent. They will likely ask you for receipts to prove the value of your modifications. When the value of your vehicle increases, you must adjust your policy to reflect the modifications. It determines the payout if you experience a loss.
Insuring a modified vehicle requires industry expertise. Don’t buy a standard policy and expect the insurance company to cover your modifications. It won’t happen. Talk to your local insurance agent, and make sure that they understand exactly what your car is worth and how much it means to you.