Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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UPDATED: Oct 19, 2021

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Here's what you need to know...

  • Auto insurance rates are calculated based on the estimated risk that’s present in the household
  • If a household has spotty driving record, high road exposure or a vehicle that’s more likely to get into a loss, the premiums will be higher than average
  • Auto insurance companies will cover original manufacturer equipment on your vehicle and some common aftermarket upgrades under the standard policy provisions
  • If you made modifications to enhance the performance of your vehicle, it’s important to notify your insurer to see if it affects your coverage and your rates
  • Some vehicles that are modified will require specialized coverage and others are acceptable under a standard carrier’s policy provisions
  • There are specific modifications that may slightly reduce your premiums by acting as theft deterrents

Car modifications serve several different purposes. You can modify your vehicle to personalize it, you can modify it to enhance performance, or you can modify it to improve function. Regardless of the reason, it’s important that you take the time to research how modifications can affect your car insurance before you make them. Compare car insurance rates now by using our FREE tool above!

If you’re thinking about installing some low-profile tires or a powerful exhaust and intake system, you should look over your insurance contract to see what your duty as a policyholder is. Some contracts specifically say that you need to notify your insurer immediately when you do modifications on your car. Others won’t even cover modifications because of the risk they present. Here’s what you need to know before you’re punished by your insurer for making car mods your new hobby.

When do you need to worry about modifications under your policy?

If you’re a car enthusiast, you’ll need to worry about modifications as soon as you get that top-of-the-line tires or that premium paint job. Modifications to your insured property really only become a serious issue when you carry physical damage coverage. If you have a liability-only policy, it’s not likely that the insurer will pay much mind as to how much you spent getting metallic paint. That’s because it’s not your carrier’s responsibility to pay for repair bills when you don’t carry comprehensive and collision cover.

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Understanding Policy Language

If you really want to dissect how modifications are treated under your policy, you need to be able to decipher the meaning of the language used in your policy contract. Auto insurance policies are contracts that you agree to when you make premium payments. If you expect the insurer to pay for damages covered by the policy coverage types you select, you need to know what nullifies the contract and where the limitations exist.

How does the language set limitations for repair costs?

If you were to look over your Personal Auto Policy booklet, you’ll find the verbiage that’s used to define limits for physical damage repair costs under Part D of the policy form. Here, it says not just what the company will pay for, but also how much the company is willing to pay.

Under Part D of the policy, there is a host of exclusions, and the most common exclusion that carriers won’t cover is wear and tear.

There are also exclusions for electronic equipment not permanently installed in the covered auto and for murals of graphics painted on a pickup or van. It’s important that you read through all of these exclusions before you invest in expensive equipment.

Know the insurer’s limits of liability under your physical damage coverage?

Physical damage losses to covered autos are covered under your insurance, but the insurer has to set a limit of liability or they would be stuck paying for unreasonable repair costs. Under the limit of liability section in Part D of your policy, the company states the most they will pay for losses to the covered auto. Here are some limits stated under the contract:

  • Actual cash value of the covered auto based on its condition at the time of loss
  • Cost to repair or replace damaged property with property of like kind and quality
  • Up to $1000 for permanently installed electronic equipment that’s not excluded
  • If the replacement is better than original equipment, the insured must pay for the difference
  • Insurer will pay for cost of repairs based on a competitive bid that’s approved by the company
  • If the bid isn’t approved by both parties, you can request an appraisal of the loss and damages from a third-party source.

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Which modifications will increase the cost of your premiums?

Now that you have a basic understanding of the insuring agreement, it’s time to learn which modifications are going to take a bite out of your wallet. Typically speaking, any modification to the engine or the exhaust system can affect your rates depending on the extent of the change. Other modifications that could leave you spending hundreds or thousands more in premiums include:

  • Chrome bumpers
  • Racing tires and wheels
  • Vertical doors
  • Hood ornaments or accents
  • Undercarriage lighting
  • Spoilers
  • Expensive stereo equipment
  • Fog lights or auxiliary lighting

What qualifies as a modification?

Not all aftermarket changes are major modifications. In general, big-name companies in the insurance marketplace will look at the large population of car owners to determine which vehicle upgrades should be classified as common and which need to be handled more carefully. If a huge percentage of the population invests in alloy wheels, the cost of these wheels will probably be covered under your standard coverage as long as the cost is reasonable. If you’re not sure whether or not your changes qualify as an aftermarket modification, it’s best to ask your agent.

Can you cover modifications under standard insurance?

Whether or not you’ll be able to cover your modifications with a special endorsement depends on the company and the extent of the changes. Some companies simply don’t specialize in modification insurance, but others have decent provisions. If you do add an endorsement to cover components, you’ll need receipts or an appraisal to show how much you’ve spent.

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Be Aware of Racing Exclusions

You can pay extra for coverage and still have your claim denied if you’re involved in an act excluded from the policy. Modifications are very common among speed racers, and this is why racing is specifically excluded under your policy.

If you have a loss while racing on a track or road, your damages won’t be covered.

If you love your car so much you want to enhance it, make sure that it’s protected with the right level of insurance. Call your agent and ask about the modifications that you’ve made first. Then, get quotes from multiple companies through an online quoting tool so that you can compare the charges. Settle for the company with the best coverage options and affordable rates so that you have coverage for all of the investments that you’ve made in your car. Enter your zip code in our FREE tool below to compare car insurance rates now!