Depending on the kinds of modifications you make to your vehicle, you may need to buy a custom parts and equipment endorsement to cover any aftermarket parts. Usually, if you've made numerous and expensive modifications, adding coverage to your standard auto policy may not be enough.
For a highly customized vehicle that you've upgraded and made into one of a kind, you may need to buy specialty auto insurance. Consequently, there are several factors related to auto insurance coverage that you should consider before making any physical or mechanical modifications to your vehicle.
An insurer will consider special factors when it comes to insuring a custom car, classic car, or souped-up car you use for amateur racing. Insurance coverage generally costs you more since the modifications you make to the vehicle to enhance its performance or look can classify it in the high-risk category. This is especially true if the modifications you make come at a higher price tag than what the vehicle itself is worth. For the same reason, some companies won't even insure a highly customized vehicle.
If your auto insurance company provides coverage on modified vehicles, policy restrictions – which vary by state – may apply. For instance, it's often easier to insure a classic auto if you put few miles on it by driving it only for cruise ins and to and from classic car shows. Often, an insurer will limit the number of miles you may drive the vehicle each year as well as place restrictions on where you can drive it.
While an insurer may cover a car you sometimes use for amateur racing when you drive it on regular roadways, the company may not cover the vehicle when you drive it on a race track. But the insurer may limit how much it will pay you if the car is in an accident on the roadway, even if it's a total loss. However, depending on the insurance laws in the state where you live, your vehicle may be covered for an accident that occurs even on a race track as long as you were not driving it in a race.
When insuring a vehicle to which you have made expensive modifications, you can choose between a stated cash value or agreed value policy. An agreed value policy may cost you more, but once you and your insurance company agree on the value of your customized vehicle, it won't depreciate.
An agreed value policy can be a practical choice for a vehicle that is so unique that there is nothing comparable to it on the market. You will be paid in full the amount on which you and the insurer agree when the policy is issued.
Although a stated cash value policy considers modifications and custom parts or equipment you've added to your vehicle, the insurer may pay you less than the amount stated in the policy. This often is the case if your vehicle has depreciated in actual cash value at the time you file a claim.
The Right Insurer
When shopping for auto insurance, let an insurer know the nature of any modifications you've made to a vehicle in addition to its current value including those modifications. Based on the cost of the modifications, many insurers include some amount of coverage for custom parts and equipment that aren't factory installed provided that your standard policy includes comprehensive and collision coverage.