How Modifying Your Car Affects Your Auto Insurance – Nasdaq

Posted: Saturday, June 04, 2016

Since the advent of the automobile, drivers have been modifying the appearance and performance of cars and those changes can have a significant impact on auto insurance.

Bootleggers during the U.S. Prohibition altered their cars to improve performance and escape the law but legal alterations with good intentions still affect insurance rates. Changes to the appearance of a stock car can affect premiums, too. Yet, enthusiasm for customizations is still strong so owners need to be conscious of the insurance ramifications any change might have.

Modifications that affect policies are generally less obvious that a cartoon rocket booster roped to a flatbed truck (although that, too, would not be taken lightly by car insurance companies).

A modified or custom part could be any piece of an automobile that was not included in it’s original design. Even name brand or “factory” parts for a specific vehicle can be designed to alter performance or appearance, which in turn, could impact an owner’s auto insurance rates.

Generally, insurance companies consider any vehicle to be modified or customized if the chassis, body or frame are structurally modified, performance is considerably augmented, or the value of a custom paint job is far greater than the original. From the perspective of the insurance companies, this is a reasonable stipulation of an auto insurance policy. There is a good chance performance parts cost more than standards parts and increasing the cost to repair the vehicle, in the event the part is damaged, is not an expense companies are willing to insure. Auto part costs aside, increasing performance could also affect the likelihood of a vehicle being in or the severity of an accident.  

The cost to replace a souped-up coupe might be the same as a new one from the factory, but the high-performance version could lead to higher medical bills and other damages

Insurance Solutions for Classic and Modified Cars

Insurance solutions exist for drivers with modified cars or classic cars that have been restored and designated as modified.

Most auto insurance companies offer an endorsement or supplemental coverage drivers can purchase to cover qualifying vehicles worth more than after modifications were made. The catch is that not all aftermarket parts or modifications are covered so drivers need to reference their individual policy to know for sure what is covered. Classic or collectable vehicles often qualify for a specific endorsement or a specialty auto insurance policy designed for them.  

Before modifying a vehicle, drivers should consult their insurance company. Assuming their auto insurance provider will still cover the vehicle, drivers should weigh the cost and benefit or the modification because the cost of their premiums will likely increase. The pleasure of more horsepower might end up not being worth the perpetual insurance expense.

Usage-based auto insurance policies could change things in the future. More insurance carriers are using tracking tools to price auto insurance based on individual driver behavior, meaning a company would know how fast their customer was driving. Whether they were driving a performance race car or not might not matter as much, as long as their insurance company knew hey were obeying the law.


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