Whether you've changed your car up with window tints or a petrol turbo, your car insurance might be affected. If it has been heavily modified, you might need specialist car insurance, which tends to cost more. But before you go there, we've listed how normal car insurers cover modified cars below.
How do some normal car insurers cover modifications?
Budget Direct will cover you for modifications you've told it about that it has approved in writing. If you have any further modifications planned then these should also be communicated.
Real states it will cover "accessories or modifications made to your car that you have told the insurer about and that they've agreed to cover", but unfortunately doesn't mention any more specifics than that.
Youi may provide cover to legally modified cars provided you tell it about the mods and it has agreed on specific amounts that are applicable. Examples of legal modifications include:
AAMI car policies automatically include cover for modifications and accessories up to the amount your vehicle's covered for, you just need to let AAMI know what accessories or modification you've added to your car. You'll also need to make sure your car is valued correctly and includes those modifications.
It varies depending on provider, but modifications covered by most insurers include:
Alloy wheels
Bicycle racks
Bull bars
CD stackers
Chrome exhaust systems
Driving lights
Leather seats
Reversing cameras
Roof racks
Tow bars
Sunroofs
Modifications typically not covered by mainstream insurers include:
Custom paint work
Roll bars or roll cages
Racing harnesses
Nitro or hydrogen fuel-equipped engines
Turbo or supercharged engines
Notifying your insurer about a car modification
Most insurers will cover accessories and basic modifications without needing to be notified. There are certain things that some insurers will want to know about or even won't cover, though. If you're fitting something like a turbocharger on the car, a roll cage or getting it dipped in custom paint, it could be a good idea to get on the phone to your insurer first.
With certain modifications, such as those listed above, you may not be covered by a standard policy from a mainstream insurer. Instead, you'll need to take out one of the following with a specialist insurer, designed for modified vehicles:
Regular use. Personal or business purposes.
Recreational use. For cars not used for regular everyday driving, but still driven occasionally for recreation.
Limited recreational use. For vehicles driven fewer than 60 days or 5,000 kilometres a year.
Club/concessional use. Cover for modified cars that are registered under a club or concessional scheme.
Restoration/laid-up. For unregistered vehicles being restored, provided they are stored securely in a garage.
What do specialist insurers cover?
The following is a list of insurance companies who offer modified car insurance for exotic or historical vehicles in Australia:
Offers hard to place insurance for modified and imported vehicles
When can specialist car insurance help?
Specialist car insurers appreciate that people take great care in investing time and money into their vehicles and are therefore more willing to insure vehicles with performance-enhancing modifications. Certain modifications, such as to the engine, chassis or suspension, may prevent you from securing cover from a mainstream insurer or make the premiums unreasonable.
Unique car insurance
Specialist insurers usually cover unique modifications by adding substantially to the excess you pay. They also tend to charge more for more powerful vehicles. Boosting your car's power by 20% will probably boost your premiums by at least 20% as well. You won't necessarily be able to mitigate the cost increases by installing modifications for safety, because the added value of the modifications still contribute to the overall cost of the vehicle.
Specialised insurance for modified classic cars
Specialists are particularly good at taking care of modified classic cars. They are better able to negotiate a more accurate agreed value for the car rather than simply resorting to market value, while understanding the needs of the owner.
For example, they may offer flexible lay-up periods for classic cars which don't see much use. They are also likely to offer you the choice of your own mechanic and the option to retain valuable or rare parts salvaged from your car in the event of an accident. Mainstream insurers can rarely offer such flexibility for modified classic cars.
Should I use modified car agreed value or market value?
When looking for modified car insurance you'll have to decide with market or agreed value cover. In most cases, it will probably be best to go for an agreed value policy, as outlined below:
Market value. This policy pays you the car's current market value, subject to depreciation, at the time of the claim. Thus, the car's replacement value fluctuates constantly, meaning a modified car covered by this policy will almost always be underinsured. Market value is rarely used for modified or classic cars.
Agreed value. Agreed value is how much you and your insurer agree the car is worth. This number is locked in at the time of purchase and can only be changed at certain times. This is especially useful for heavily modified or classic cars, but generally costs more. Agreed value is almost always used for modified or classic cars.
Is it possible to get low-cost cover for modified cars?
This depends. How cool is your car? Like any policy, there are plenty of ways to reduce your premiums when buying modified car insurance. These include:
Insuring for market value rather than agreed value
Buying online to get a discount (up to 20%)
Insurance rules for modified cars
Is your modification legal? Naturally, all modifications made to your car must be street-legal, otherwise no insurer is even going to look at you. Also, if you are stopped by the police with illegal modifications, you could face a fine or worse.
Was your modification approved? In Australia, modifications must be approved by the motor vehicle licensing department in the state or territory you reside in. They must comply with Australian Design Rules, traffic rules and regulations and also with the National Code of Practice for Light Vehicle Construction and Modification (NCOP).
Do I need to tell my insurer if I make modifications to my car? Yes. If you don't tell your insurer, it can reject your claims and cancel your policy. If your vehicle is under warranty and you don't tell the insurer, you may void the warranty entirely. And if you don't tell the licensing authorities and your modification turns out to be illegal, you could receive a defect notice and a substantial fine and have your vehicle de-licensed or impounded.
Modifications which are typically permitted include:
Additional lighting
Air shock absorbers
Alarm systems
Radio and stereo systems
Roof racks
Single tone air horns
Stabiliser bars
Modifications which are typically not permitted include:
Dark window tinting
Loud exhaust systems
Changes to the engine that do not fit the legal standard
Illegal changes to the chassis
Non-compliant changes to the tyres
Changes to the suspension that do not comply with legal standards.
How can modifications affect the cost of insurance?
There are 2 main reasons that a car modification will boost your premiums:
It increases the risk of an accident. For example, getting a custom paint job might drive up the risk of an accident if it's shinier and reflects more light into other drivers' eyes.
It increases the risk of your car being stolen. The same paint job could increase the risk of your vehicle getting stolen if it makes your car look fancier and thus more appealing to a thief.
Exactly how much a particular modification will affect your premiums really depends on the specifics of the modification. The only general rule is that an insurance company will be much more willing to give you a good deal if the modification has been installed by a licensed professional, rather than by you.
Ready to compare car insurance for modified cars?
The cost of your car insurance usually differs depending on your circumstances. Your gender, the type and colour of the car you drive, the amount of cover you need, your driving experience and other factors will have an impact on your quote. Always check the product disclosure statement (PDS) to make sure which product is best for you.
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The NSW Government defines a modified vehicle as one that's been modified from its original manufacturer's specification. This could be by replacing, adding or upgrading components of its body or enginge, or things that alter its appearance, handling or performance.
What's best for you will depend on what kind of modifcations your car has, what your budget is and the level of cover you need. If you've got pretty standard modifcations then a normal insurer might fit your needs. If you've got more enhanced modifications then you may be better suited to looking at specialist car insurers.
Gary Ross Hunter is an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146).
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