Car insurance for modified vehicles

Have you ever thought about increasing the horsepower of your engine, switching to large alloy wheels or adding a spoiler to your car?

Souping up your vehicle can be a fun way to personalise your car and improve its performance; however, you may want to consider how modifications could change the price you pay for car insurance before forging ahead with those additions.

So, let’s take a look at some of the things you may need to consider when insuring a modified vehicle.

What is a car modification?

Changing the look or improving the performance of your vehicle is considered a modification. This can include the following additions:

  • Tinted windows
  • Neon lights
  • Custom paint jobs
  • Wider tyres
  • Alloy wheels
  • Sunroof
  • Spoilers
  • Roll bars
  • Higher-performance brakes
  • New exhaust system
  • High-performance stereo
  • Suspension upgrades
  • Turbochargers or superchargers
  • Sport seats

How can modifications affect your car insurance?

In an insurer’s eyes, modifications that change the look and performance of your vehicle may be considered to create a greater risk of you having an accident and a greater risk of your car being stolen. They may also bump up the costs for the repair or replacement of your car. This means that depending on your insurer and the modifications you make, you may end up paying a higher premium.

If you already have car insurance, it is advisable to talk to your insurer about your intended changes before you modify your car, to determine how the modifications may impact your policy or premiums.

This way, your insurer can let you know if those modifications are covered by your current policy or if you will have to change your cover.

It is also important to note that you generally stand a better chance of getting a more affordable insurance quote if your car has been professionally modified, compared to if you do the modifications yourself.

You will need to check with the insurer as to whether the below car insurance policies cover modifications.

Before modifying your car, it pays to check that the makeover you are planning is legal. Relevant state or territory’s vehicle standards and modifications guidelines can often be found on the state or territory transport department website.

Illegal modifications can include:

  • Loud exhaust systems
  • Tinted windows that are darker than what is legally permitted in your state or territory
  • Non-compliant modifications to the engine, including supercharged or turbocharged engines
  • Lowered vehicles where the body is more likely to scrape the road, curbs and speed bumps
  • Under-body neon lights
  • Tyre replacements that don’t comply with the car maker’s minimum load carrying capacity specifications
  • Changing seat belts for harness belts
  • Roll bars or roll cages

If your modification is illegal, then you are at risk of being issued a significant fine, or your vehicle being de-registered or even impounded by the police or the transport department.

You could also receive a defect notice from your state or territory transport department or police if your vehicle is found to be defective (e.g. it does not meet roadworthiness requirements and registration standards such as bald tires or being too low to the ground). This would require you as the owner of the vehicle to have it repaired to make it safe and legal to drive.

Depending on what state or territory you live in, you may need to seek official approval before performing certain complex modifications, such as an engine upgrade, gearbox and rear axle changes and steering and brake replacements. In addition, if you are a young driver with a provisional or probationary licence, you may not be permitted to drive cars that have received certain performance modifications.

If your insurer is made aware of illegal modifications, such as when making a claim, your policy make be cancelled. You may also be denied cover for your car if you apply for insurance for a vehicle that has been illegally modified.

Check with your local transport department for more details on legal and illegal modifications:

What car modifications are generally allowed by insurers?

Minor modifications that insurers will typically let you make to your car include:

  • Bicycle racks
  • Tow bars
  • Roof racks
  • Alloy wheels

Depending on your insurer and the exact nature of your modification, increased premiums may apply in some cases. It’s important to bear in mind that many insurers will ask that you notify them whenever you make a modification to your car.

What are the main types of car insurance?

There are four main types of car insurance in Australia. They are:

  • Compulsory Third Party (CTP) insurance: provides financial cover for injury or death in an accident
  • Third party property damage: provides financial cover if you cause damage to someone’s property (such as their car or you drive into their fence) in an accident.
  • Third party, fire and theft cover: provides financial cover for your car if it’s damaged by fire or stolen by thieves, as well as cover for damage to someone’s property.
  • Comprehensive car insurance: the most advanced form of cover that provides financial protection for your vehicle and others if you are involved in an accident, if your car is damaged by applicable weather events or if it’s stolen.

To find out more about the different types of car insurance, check out our overview.

The insurance premiums, excess payable and level of cover can vary depending on the policy you choose. It is important for you to check the product disclosure statement (PDS) and other applicable terms and conditions before buying 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 the market value of your car 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, on the other hand, involves you and your insurer agreeing on how much the car is worth. Agreed value provides more certainty about what compensation you will receive from your insurer if your car is written off, however the premiums can be higher than insuring your car for its market value.

What should you consider when modifying your car?

In summary, it serves to do your research and check whether the modification or modifications you are planning on making to your car are legal.

You then may want to consider whether the modifications will increase the value or performance of your vehicle, and how this could affect the cost of your car insurance.

If you already have car insurance, it is a good idea to talk to your insurer, let them know what you’re planning on doing and ask whether this will affect your cover.

Generally, the more extensive or expensive your modifications, the more you will have to pay to insure your vehicle.

It’s often a good idea to shop around and compare your options before deciding on an insurance policy.

If you’re considering car insurance policies, the comparison table below displays some of the policies currently available on Canstar’s database for a 30-39 year old male seeking comprehensive cover in NSW without cover for an extra driver under 25. You will have to check with the insurer if they cover modifications.

Please note the table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical) and features links direct to the providers’ website. 

Use Canstar’s car insurance comparison selector to view a wider range of policies.

Cover image source: Sunrise Team (Shutterstock)

This article update was reviewed by our Sub Editor Tom Letts and Senior Finance Journalist Shay Waraker before it was published as part of our fact-checking process.

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