ClubGP: Insurance

Got Upgrades? Check Your Insurance Policy

When you go looking for auto insurance, one subject that is rarely mentioned is how to cover a car sporting improvements. Whether the upgrade you've made is external, like a special paint job or fancy rims, or internal, like a really powerful engine, you may have voided your existing policy, and you may need to do a lot of serious shopping before finding new coverage.

There are no hard and fast rules when it comes to upgrades and modifications, but generally speaking, aftermarket parts are not covered by standard policies, and if you get in an auto accident in your tricked out car, you run the risk of not having your damaged add-on parts replaced, or worse, your insurer could deny your claim entirely.

The reason for these dire situations is that insurance is an industry based on perceived risk. Insurers don't dislike modified cars so much as they don't have enough information on them. A car you drive off the dealer's lot is in a database with many other similar vehicles, but every modified car is unique. From the insurer's point of view, a situation they've seen thousands of time is coverable, but one they've seen only once or twice is not.

If you are driving a modified car, you do have some options:

Stick with your current policy. If you do this, you risk not being paid for add-ons, but the basic value of the car will usually be covered. Many insurance companies have clauses which state that they will pay a certain amount over the value of the car, but the cap on that is usually low – around $1,000.
Move to a specialty insurer. Insurance companies that specialize in classic, vintage, modified, and collectible cars usually offer policies based on agreed value, or stated value, rather than actual value (which is what standard policies use.) Agreed value lets you insure your car for more than the blue book value, as does stated value, but proof of the modifications may be required, and appraisals may be requested as well. A stated value policy is the most expensive option.

In some cases, even your insurance agent may not understand exactly what is covered and what is not, but the good news is that if your agent tells you they will cover something, the company must honor that promise.

When speaking to a car insurance agent, the best thing you can do is be fully prepared. Have an itemized list of any modifications – even a chameleon paint job counts – photographs, and receipts, as well as the estimated value of the whole car. The more information you provide, the more likely you are to find coverage that will actually protect the car you have, as opposed to the car you began with.