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 can 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 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?

Modifications can bump up your car insurance costs if they increase your risk in two key areas: the risk of having an accident or your car being stolen. This is how insurers assess your modifications.

Modifications that change the look and performance of your vehicle can be considered to create a greater risk of you having an accident and a greater risk of your car being stolen.

If you already have car insurance, before you modify your car it is advisable that you inform your insurer of your intended changes.

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 doing the modifications yourself.

The below table is of car insurance policies, you will have to check with the insurer if they cover modifications.

Is your modification legal?

Before modifying your car, it pays to check that the makeover you’re planning is legal. It is best to find out your relevant state or territory’s vehicle standards and modifications guidelines.

Illegal modifications to avoid generally include:

  • Loud exhaust systems
  • Tinted windows that are darker than what is legally required 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 if your vehicle is found to be defective. This will require the owner of the vehicle to have it repaired to make it safe to drive.

Depending on what state or territory you live in, you may need to seek official approval before performing certain complex modifications. 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.

Check with your local transport department for more details.

What car modifications are generally covered by insurers?

Minor modifications that insurers will typically cover 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.

It’s also important to note that some modifications have the potential to reduce your premiums, such as adding parking sensors.

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: protects you if you injure or kill someone in an accident
  • Third party property damage: covers you if cause damage to someone’s property (i.e. their car)
  • Third party, fire and theft cover: also covers your car if it’s damaged by fire or stolen by thieves
  • Comprehensive car insurance: the most advanced (and expensive) form of cover

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

The insurance premiums, excess payable and level of cover varies depending on the cover you choose. It is important for you to check the product disclosure statement before buying insurance.

You will also have to decide on how much your car is worth when choosing a policy.

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 current market value of your car, if your car were to be written off. However, 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 certainty about what compensation you will receive from your insurer if your car is written off, however the premiums can sometimes 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 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 doing and ask whether this will affect your cover.

Generally, the more extensive or expensive your modification, 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.

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