Modified car insurance: telling your insurer, custom parts coverage and aftermarket repair rules

What counts as a modified car?

No law defines a "modified car" for insurance purposes. In practice it means anything that changes the car from the way the manufacturer built and sold it. Each type of change matters to an insurer for a different reason.

Each insurer's application and policy wording decide what counts. If you are unsure, ask before you need to claim.

Why you should tell your insurer about modifications

Your answers on the application set the deal

The Pennsylvania Insurance Department's consumer guide puts it simply: the insurer asks questions and uses the answers to decide whether to insure you and how much to charge. A car with major changes is a different risk from the stock model the insurer priced.

Leaving changes out can backfire at claim time. Florida's statute on insurance applications, for example, treats what you tell the insurer as representations. A misrepresentation, omission or concealment can prevent recovery under the policy if it was fraudulent or material to the risk the insurer accepted. Florida's consumer services division gives the same warning about drivers left off an application: the insurer may deny the claim and cancel the policy for material misrepresentation. Rules differ by state, so check with your state insurance department if you are unsure what you must disclose.

How mods can change your premium

The car itself is one of the biggest rating factors. Our guide to how your vehicle affects your premium explains why repair costs, theft risk and safety records matter. Modifications pull on the same levers:

• Added value raises what the insurer may pay after a theft or total loss.
• Performance upgrades change how fast the car can go and how hard it is to repair.
• Rare or custom parts can take longer and cost more to replace after a crash.

An insurer may price a modified car the same as a stock one, add a charge, ask for photos and receipts, or decline certain changes. The only way to know is to ask. The premium factors tool shows which other details move your price.

Safety equipment and the law

Federal law bars manufacturers, distributors, dealers, rental companies and repair businesses from knowingly making inoperative any safety device or design element installed to meet a federal motor vehicle safety standard. That is one reason a shop may turn down a job that disables airbags, lighting or other required equipment. Your state may also have its own equipment rules for things such as window tint, lighting and exhaust, so check them before you change those parts.

Custom parts and equipment coverage

Collision and comprehensive coverage pay to repair or replace your car, generally up to its actual cash value. Equipment added after the car left the factory is where the gaps appear:

• California. The Department of Insurance says there is usually no or limited coverage for enhanced aftermarket stereo equipment, telephones, or tires and wheels unless the carmaker installed them, and that extra coverage is usually available for an added charge. Its auto guide lists custom wheels, navigation systems and other permanently installed custom equipment as things you can buy coverage for.
• Florida. The Department of Financial Services defines customized equipment as items added after the car leaves the manufacturer and says they can be covered by endorsement only.
• Pennsylvania. The state's guide says custom stereo speakers and systems that the manufacturer did not permanently install generally are not covered unless declared and added to the policy.
• Nationally. The NAIC's consumer guide and the Texas Department of Insurance both say most policies do not cover equipment that is not permanently installed.

An add-on coverage of this kind is an endorsement: it changes the standard policy and lists a limit for your custom parts.

Example: what a custom equipment endorsement changes

Example: a car worth $20,000 in stock form has $5,000 of aftermarket wheels and audio. It is stolen and not recovered, and the comprehensive deductible is $500. These figures are hypothetical, and insurers apply deductibles and limits to endorsements in different ways.

Receipts and photos make the difference. The Texas Department of Insurance suggests documenting special features and custom parts if you need to negotiate the value of a total loss.

Aftermarket vs OEM parts in repair estimates

The second way modifications meet insurance is in the body shop. OEM parts are made by or for the car's manufacturer. Aftermarket parts come from another company. Florida's Department of Financial Services describes an aftermarket part as a replacement for the non-mechanical sheet metal or plastic parts that make up the outside of the car, including inner and outer panels. Our glossary entries on OEM parts and aftermarket parts cover the terms in more detail.

The common standard is "like kind and quality." The NAIC's model claims regulation says an insurer may not require replacement crash parts unless they are at least equal to the original in fit, quality and performance, and that those parts should carry permanent identification of their maker. A drafting note says this section carries over the core of the NAIC's 1,987 text After Market Parts Model Regulation. The Texas Department of Insurance applies the same idea: the insurer must pay for parts of like kind and quality, not necessarily original manufacturer parts.

State rules on aftermarket parts

States that have written rules mostly require two things: the parts must be as good as the originals, and you must be told. Some examples:

California's Department of Insurance also tells consumers that repair shops must give a written estimate before work starts and an invoice afterward that identifies each replaced part as used, reconditioned, rebuilt, aftermarket or OEM.

What to do if your estimate lists aftermarket parts

1. Read the estimate line by line and find every part marked as non-OEM, used or rebuilt.
2. Ask the shop whether those parts fit and perform like the originals, especially on a newer car or on safety-related parts.
3. Check whether your policy or any endorsement says which parts will be used. The usual promise is parts of like kind and quality.
4. If you want OEM parts the policy does not promise, ask what the price difference is. You may be able to pay it yourself.
5. If you think a part is not of like kind and quality, put your concern in writing to the insurer and keep copies.
6. If you cannot settle it, our guide to claim disputes explains appraisal and complaints to your state insurance department.

How to insure a modified car, step by step

1. List every change you have made, with dates, costs, receipts and photos.
2. Read your policy and declarations page to see whether custom equipment is excluded, limited or covered by endorsement.
3. Call your insurer or agent and describe each modification before you need to claim.
4. Ask whether the changes affect your premium, whether any are not accepted, and what a custom equipment endorsement costs and covers.
5. Set the endorsement limit close to what it would cost to replace your add-ons, and check how its deductible works.
6. If your insurer will not cover the changes, compare quotes from other insurers or a licensed agent who places modified cars.
7. Update the insurer each time you add, remove or replace a significant part, and keep your records with your policy.

The coverage checklist helps you review the rest of your policy at the same time.