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Car insurance for a modified car

Written by
Mark Bristow's profile picture
Mark Bristow
Senior Finance Content Producer
Edited by
Jessica Pridmore's profile picture
Jessica Pridmore
Finance Editor
Fact Checked
Car insurance for a modified car
Source: Rakhmat Darmawan/Shutterstock.com

Thinking about increasing your engine performance, making a statement with alloys or adding a spoiler or sunroof? While most insurers don’t offer specific modified car insurance, you may still be able to get coverage depending on what you modify.


KEY POINTS

  • Your modified car can be insured as long as your modifications are legal and comply with your state or territory’s regulations.
  • Providers who will insure a modified car that requires certification may be limited.
  • Insurance premiums for modified cars are often higher because the changes add to the overall value of the vehicle.

Can you get car insurance for modified cars?

You can get insurance for your modified car , as long as all of its modifications are legal and comply with your state or territory’s regulations. However, you may find that only a handful of providers offer insurance for cars with modifications that require certification.

You could be covered with a general car insurance policy if you’ve only made minor modifications that require no certification. If your car has been heavily modified, you might need specialist modified car insurance. You can check a policy’s Product Disclosure Statement (PDS) or contact the provider directly for information on what modifications are included and excluded in any policy you’re considering.

What is a car modification?

Car modifications refer to any alterations or additions made to a vehicle after it has left the factory. This includes any changes to the vehicle’s appearance, features, engine, height, suspension or fuel tank. Modifying your vehicle can be a fun way to stylise your car, or improve its performance, though your mods could potentially affect the cost and cover of your insurance policy.

Specific examples include:

  • Window tinting
  • Custom paint
  • Neon lights
  • Wider tyres or alloy wheels
  • A spoiler or rear wing
  • A sunroof
  • A roll bar
  • Higher-performance brakes
  • A new exhaust system
  • A new or improved audio system
  • Turbochargers or superchargers
  • Sport seats

Keep in mind that any significant car modification that could potentially affect car safety requires an inspection and certification by an approved and licenced certifier. For example, suspension modifications are usually considered significant car modifications because they can affect the safety of your car.

It’s also important to make sure your modifications are legal before going ahead with them. For example, aftermarket underbody neon lights have many restrictions around their use. Each state and territory will have their own regulations and restrictions around what car modifications are legal or illegal.

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What is the best car insurance for modified cars?

The best car insurance policy for you will ultimately depend on your personal needs and circumstances, but when looking for car insurance for modified cars you may want to consider the following:

  • A comprehensive car insurance policy will generally provide you with coverage if your car is damaged or written off in an accident or due to theft, fire or a weather event.
  • Specialist modified car insurance providers may provide features and services that a general car insurance provider would not.
  • Optional extras, such as windscreen replacement, rental car usage and roadside assistance, may be worth considering, keeping in mind you’ll likely pay extra.
  • If you’ve made costly modifications to your car, an agreed value policy that includes these mods may provide more coverage if you need to make a claim. However, premiums are generally higher under agreed value policies.

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Are modified cars more expensive to insure?

Modified cars are often more expensive to insure, and you may end up having to pay higher premiums. Modifications and accessories can add to a vehicle’s overall value, and may increase the cost to repair or replace your car if a claim is made.

Any increases to your car insurance premiums may depend on both the insurer you choose and the car modifications you make. You generally stand a better chance of getting a more affordable insurance quote if your car has been professionally modified, compared to if you did it yourself.

Since car insurance for modified cars is typically more expensive, it can be worthwhile to shop around and compare different insurance policies to find one that’s right for you. Remember to read the fine print for any policy you are considering, which can be found in the PDS and Target Market Determination (TMD). Consider contacting a provider directly for additional information, particularly if it’s in reference to a specific car modification you have.

Vehicle modifications for people with a disability

Vehicle modifications may be necessary to support a person with a disability for functional and practical reasons. These can include assistive technology that helps a person to drive safely as well as to store mobility aids. Funding may be available through the National Disability Insurance Scheme (NDIS) to help cover some costs involved with modifying your vehicle. Spinal Cord Injuries Australia suggests to first contact an Occupational Therapist for an assessment for relevant recommendations about vehicle modifications. Specialist disability car insurance may also be available.

How can car modifications affect car insurance?

If you modify your car and the changes are legally approved in your relevant state or territory, it may affect your car insurance depending on the type of modification you’ve made, your insurer and the type of car insurance you have.

Even if you make legal car modifications, your insurer may require that you tell them before modifying your car. They may limit what modifications are covered under a policy even if the changes are legally permitted. If you make illegal car modifications, it could void your car insurance policy entirely.

Modifications will typically increase your car insurance premiums.

The value of modifications and car accessories may be calculated into either the vehicle’s agreed value or market value. Setting an agreed value on your policy that includes your car’s modifications could be beneficial, as if you need to make a claim you’re more likely to be covered for more than the car’s market value. That said, premiums for agreed value policies are typically higher than those for market value policies.

What’s the difference between market value and agreed value in car insurance?

Depending on your policy and insurance provider, you will often have a choice between market value and agreed value when deciding on your cover.

  • Market value means the policy will cover you for what your vehicle would sell for on the market at the time of the claim, if your car were to be written off. This is subject to depreciation in your car’s value from when you take out the policy to the time of the claim.
  • Agreed value involves you and your provider agreeing on how much the car is worth. Agreed value provides more certainty about what compensation you will receive if your car is written off. However, the premiums can be higher than insuring your car for its market value.

Should you tell an insurance provider if you modify a car?

If you already have car insurance, consider discussing the modifications you are thinking about with your provider before you make them. Your provider will be able to let you know if the modifications will be covered by your current policy or if you will have to change your cover. They should also be able to give you an idea of potential premium changes that could apply.

Keep in mind that anything altered or added to your vehicle after it leaves the factory is typically considered a modification and should be reported to your insurer. Not informing your provider of a modification, even if it’s minor, could potentially affect the approval chances of any claims you make.

Rules and regulations around vehicle modifications in Australia

In line with Australian Design Rules and Australian Light Vehicle Standards Rules, each state and territory in Australia applies its own Vehicle Standards Rules for vehicle owners to comply with.

There are also usually restrictions for young drivers with a provisional or probationary licence. For example, in QLD, NSW, VIC and SA, P-platers are banned from driving certain high-powered or high-performance cars. With car insurance costs typically already high for young drivers, providers may also outright deny coverage for under 25s looking to insure their modified vehicles.

What car modifications are legal and illegal?

Legal car modifications

What’s considered a minor or a basic modification will differ depending on your state or territory. You should refer to your state or territory’s Vehicle Standards Rules for details when modifying your vehicle. It’s important to bear in mind that many providers will ask that you notify them whenever you make a modification to your car.

A general list of legal modifications can include:

  • Sound systems
  • Air-conditioning systems
  • Sport seats
  • Tinted windows
  • Sunroofs
  • Bull and/or towbars
  • Custom paint jobs
  • Alloy wheels, wider tyres and mud flaps and pebble guards
  • Roof racks
  • Spoilers

There will be exceptions to this list due to state and territory based restrictions, so it can be important to check with your state or territory motoring authority before undertaking any modification.

Illegal car modifications

Common, potentially illegal car modifications can include:

  • Exhaust systems exceeding set legal noise limits
  • Tinted windows that are darker than what is legally permitted in your state or territory
  • Non-compliant modifications to the engine
  • Lowered vehicles where the body doesn’t pass the acceptable level of ground clearance (not less than 100mm as stated in the Australian Design Rules)
  • Under-body neon lights
  • Tyre replacements that don’t comply with the car maker’s minimum load carrying capacity specifications
  • Changing the seat belts for harness belts
  • Unapproved or non-compliant modifications to increase payload or towing capacity

What happens if you modify your car illegally?

If your car modification is illegal, you could be issued significant fines, or your vehicle could be deregistered or even impounded. You could also receive a defect notice from the transport department or police if your vehicle is found to be defective. This would require you to have the vehicle repaired or altered to make it safe and legal to drive.

If an insurance provider is made aware of illegal modifications, your policy will likely be cancelled. You may also be denied cover if you apply for modified car insurance for a vehicle that’s illegally modified.

Contact your relevant state or territory transport department for more details to find out if a car modification is legal. It may be worthwhile to email your queries in order to obtain written confirmation on what’s required for a modification you’re planning. More information is available at these links:

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Cover image source: Rakhmat Darmawan/Shutterstock.com

This article was reviewed by our Finance Editor Jessica Pridmore before it was published as part of Canstar’s fact-checking process.

Mark Bristow's profile picture
Mark BristowSenior Finance Content Producer
Mark Bristow is Canstar's Senior Finance Content Producer, and an experienced analyst, researcher, and producer. While primarily focused on Australian mortgage and home loan expertise, he has experience across energy, home and travel insurances. Mark has been a journalist and writer in the financial space for over ten years, previously researching and writing commercial real estate at CoreLogic. In the years since, Mark has worked for the Winning Group, Expedia, and has seen articles published at Lifehacker and Business Insider. Mark has also completed RG 146 (Tier 1), making him compliant to provide general advice for general insurance products like car, home, travel and health insurance, as well as giving him knowledge of investment options such as shares, derivatives, futures, managed investments, currencies and commodities. Find Mark on Linkedin.

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