How Car Modifications Affect Insurance Rates

Car modifications can significantly impact your auto insurance rates, either increasing or decreasing your premiums depending on the type of modifications made. While some modifications can improve safety or vehicle performance, others can increase the risk of accidents or theft, leading insurance companies to adjust your premium accordingly. It’s important to understand how different modifications affect your insurance policy and what you need to do to stay properly covered.

In this guide, we’ll explain how car modifications affect insurance rates, which modifications are likely to raise or lower your premiums, and how to ensure that your modified car is fully insured.

1. Why Car Modifications Affect Insurance Rates

Car modifications change the vehicle from its original manufacturer’s specifications, and insurance companies consider modified vehicles a higher risk for several reasons. Modified cars may be more valuable, more difficult to repair, or more likely to be involved in accidents due to increased speed or performance capabilities. Additionally, certain aesthetic modifications can make a car more attractive to thieves.

Key Reasons Modifications Affect Insurance:

• Increased value: Modifications often increase the car’s overall value, meaning repairs or replacements could be more expensive after an accident.
• Higher risk of accidents: Performance enhancements (like engine tuning or suspension upgrades) can lead to faster driving, which increases the likelihood of accidents.
• Greater theft risk: Aesthetic upgrades, such as custom paint jobs or expensive rims, make a vehicle more attractive to thieves, raising the risk for the insurer.
• Specialized repairs: Modified vehicles may require specialized parts or labor for repairs, which could increase the cost of claims.

Because of these factors, insurance companies may adjust your premium to reflect the added risk that comes with a modified car.

2. Types of Modifications That Can Increase Insurance Rates

Certain types of car modifications are more likely to raise your insurance premium due to the added risks or increased value they bring to the vehicle. Modifications that alter the performance, appearance, or function of the car are most likely to result in higher rates.

Common Modifications That Increase Premiums:

• Engine modifications: Any changes that increase the horsepower or speed of the vehicle, such as adding a turbocharger, remapping the engine control unit (ECU), or installing a supercharger, will raise your premiums. These modifications increase the risk of accidents due to higher speeds and greater performance.
• Suspension upgrades: Lowering or raising the suspension can affect the handling of the vehicle, which could lead to accidents. Insurers view suspension modifications as a higher risk, leading to increased premiums.
• Body kits and spoilers: Aesthetic modifications like body kits, spoilers, or custom paint jobs can increase the value of the car and make it more attractive to thieves. These modifications may result in higher premiums due to the increased theft risk.
• Exhaust system upgrades: Modified exhaust systems that improve performance or change the sound of the vehicle can increase your insurance rates. Insurers may see these modifications as indicative of higher performance and a greater risk of accidents.
• Custom wheels or rims: Installing expensive custom wheels or rims can increase the value of your car and make it more appealing to thieves, resulting in higher insurance premiums.
• Interior upgrades: High-end audio systems, custom seats, or other luxury interior modifications can raise the vehicle’s value, leading to increased premiums due to the higher cost of repairs or replacement in the event of theft or damage.

If your modifications make the car faster, more valuable, or more attractive to thieves, your insurance premiums are likely to go up.

3. Types of Modifications That Can Decrease Insurance Rates

Not all modifications lead to higher premiums. Some modifications, particularly those that improve the safety of the vehicle, can actually reduce your insurance costs. By making your car safer or less likely to be stolen, these modifications lower the insurer’s risk and may result in discounts.

Common Modifications That Can Lower Premiums:

• Safety enhancements: Installing features such as anti-lock brakes (ABS), electronic stability control (ESC), or airbags can improve vehicle safety and reduce the likelihood of accidents. Insurers may offer discounts for these modifications.
• Anti-theft devices: Adding anti-theft devices like alarms, steering wheel locks, or GPS tracking systems can lower the risk of theft, which may result in reduced premiums.
• Parking sensors or cameras: Installing parking sensors or backup cameras can reduce the risk of minor accidents, such as fender benders, and could lead to discounts on your insurance policy.
• Dash cameras: While not a direct modification to the car’s performance or appearance, dash cameras can provide valuable evidence in the event of an accident. Some insurers offer discounts if you install a dash cam.

By enhancing your vehicle’s safety or reducing the likelihood of theft, these modifications can help lower your car insurance premiums.

4. Declaring Modifications to Your Insurer

It’s crucial to inform your insurance company about any modifications made to your vehicle. Failing to declare modifications can lead to serious consequences, including the denial of claims or cancellation of your policy. Insurers need accurate information about the vehicle to assess the correct risk and provide appropriate coverage.

Why You Must Declare Modifications:

• Accurate risk assessment: Insurers use your vehicle’s specifications to assess the risk of accidents, theft, and repair costs. Modifications change these factors, so it’s important to provide up-to-date information.
• Avoid claim denial: If your insurer discovers that your vehicle has been modified and you didn’t declare it, they may deny your claim, leaving you financially responsible for repairs or replacements.
• Policy cancellation: In some cases, failing to disclose modifications can result in your policy being canceled or voided, which could make it harder to find affordable coverage in the future.

Even minor modifications should be reported to your insurer to avoid potential issues with claims or coverage.

5. How to Get Insurance for a Modified Car

Getting car insurance for a modified vehicle is similar to insuring a standard car, but you’ll need to take additional steps to ensure that your modifications are covered. Some insurers specialize in providing coverage for modified vehicles, while others may not offer coverage for certain types of modifications.

Steps to Get Insurance for a Modified Vehicle:

1. Research insurers: Not all insurers cover modified vehicles, so it’s important to find a company that offers coverage for the specific modifications you’ve made. Insurers like Hagerty, Adrian Flux, and ClassicLine are known for providing coverage for modified or classic cars.
2. Provide details about your modifications: When applying for coverage, provide detailed information about any modifications you’ve made to the vehicle, including receipts, if possible. This helps the insurer assess the car’s value and the risk involved.
3. Get an appraisal if necessary: For extensive modifications, you may need to get an independent appraisal to determine the current value of your vehicle. This can help ensure you’re properly compensated in the event of a claim.
4. Compare quotes: Shop around and compare quotes from different insurers to find the best rate for your modified car. Be sure to ask about any discounts for safety or anti-theft modifications.
5. Consider an agreed-value policy: If your modifications have significantly increased the value of your car, consider an agreed-value policy. This type of policy allows you to agree on the car’s value with the insurer upfront, ensuring you receive the full value if the vehicle is totaled.

By taking these steps, you can ensure that your modified car is properly covered and that you’re paying a fair premium based on the modifications you’ve made.

6. Specialized Insurance for Highly Modified or Classic Cars

For cars with extensive modifications or classic cars, you may need a specialized insurance policy. These policies are designed to cover vehicles that have been significantly altered from their original specifications or that hold special value.

Key Features of Specialized Insurance:

• Agreed value: Instead of insuring your car for its market value, an agreed-value policy covers your car for a pre-determined amount based on its modifications and overall value.
• Limited-use policies: If you only drive your modified or classic car occasionally, you may be eligible for a limited-use policy, which can reduce your premium since the car is not driven regularly.
• Coverage for specialized parts: Specialized insurance policies often cover custom or rare parts that standard insurance policies may not include. This ensures that your modifications are fully protected in the event of a claim.

Specialized insurance can provide peace of mind for highly modified vehicles or cars that have unique or irreplaceable features.

Conclusion: How Modifications Impact Your Car Insurance

Car modifications can have a significant impact on your insurance rates, either increasing or decreasing your premiums based on the type of modifications made. Performance enhancements, aesthetic upgrades, and expensive customizations tend to raise your rates due to increased risks, while safety and anti-theft modifications can lower your premiums.

To ensure that you’re properly covered, it’s important to declare all modifications to your insurer and shop around for the best coverage. If your car has extensive modifications, consider working with a specialized insurer to get the protection you need for your investment. Properly insuring your modified vehicle will help you avoid costly surprises and give you peace of mind on the road.