If you put a lot of work into upgrading a car, your standard insurance policy may not cover the value of the equipment you install in your car. Still, if you sink several thousand dollars into your stereo system, you want to make sure that you can get your money back out of the system if you should get into an accident. To insure modified cars, you typically have to stray from the standard insurance policy.
When you start modifying your car, you should first look into which insurance companies are willing to offer coverage for upgrades. Some companies will offer policies that will cover the value of upgrades up to a specified dollar amount. For example, you may be able to find a policy that will cover up to $4,000 in upgrades. This works as long as you don't install upgrades that exceed that dollar amount.
Stated and Agreed Cash Value
Other insurance companies will allow you to customize a policy to cover the actual value of the upgrades you have installed on your vehicle. One option is for you state the value of the upgrades you have installed. Most companies do not like this option because you could state that your upgrades are worth more than they actually are, so they will reserve the right to verify the value of your upgrades with an agreed value policy. Remember that if you put $100,000 worth of upgrades into a car that was originally worth $7,000, your premiums will be significantly higher than what you would pay to insure the original car.
While some insurance companies are willing to insure modified vehicles, they are typically not willing to insure drivers who engage in high risk activities. For example, many insurance companies will have a clause in their policy that states that if you damage your car while racing, they will not cover the cost of the damage you cause to your vehicle.
It is also important to remember that you can spend several thousand dollars on a paint job without increasing the value of your car. For example, if you have a giant pizza slice painted on your car, it doesn't matter how quality the artwork is, you may be hard pressed to find someone willing to buy your car. Thus, most insurance companies will be reluctant or unwilling to insure "art" cars.
Before you start spending loads of money on your car, you should look at whether you will be able in insure your modified car with your standard policy and how much a custom policy will cost you by talking with different insurance agencies like Cory Kennedy State Farm Insurance. In the end, spending tens of thousands of dollars on upgrading and insuring your car may not make financial sense.