Insuring a Modified Vehicle: No Two Cases Are Alike

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Just as no two modified vehicle are alike, no two visits to the insurance man to protect those cars will turn out the same way. Insurance companies are in the business of assessing and essentially betting on risk. Many factors go into those assessments — age, gender, driving record, and occupation to name a few. Owners of modified vehicles should be prepared to document all alterations made to their cars and to argue on a case-by-case basis for each. Facts are your friend in insuring a modified vehicle, followed closely by attitude.

First, do not, under any circumstances lie about a modification. Full disclosure is an absolute must. If you do not disclose a modification the company is within its rights to terminate your coverage in the event of an incident. The company can claim that any change, even something as simple as changing out the front seats, alters the driver’s perception of the road thus creating an unsafe situation. The only way to counter that is to disclose the change with full documentation of exactly how the modifications affect safety and driving performance.

At the same time, while you should not lie, you should also couch your disclosure in terms the company wants to hear. A change that increases rpms and horsepower to enhance speed, while sexy to your ears translates to fast, reckless driving in the insurance world with a greatly increased chance of an accident and claim. Talk in terms of engine efficiency. Downplay the speed demon aspect of the change or emphasize that it is for on-track use only. Make it clear that the vehicle is always securely stored and not driven daily. Show proof of membership in a car club or an enthusiast organization to illustrate that you value the car. Highlight the presence of theft deterrent systems like GPS tracking and monitoring.

Be prepared to negotiate every change individually and realize that some changes may counterbalance others. An improved braking system, for instance, may take some of the premium sting out of an engine modification that enhances speed. But also, be realistic. Some things the insurance company will not like no matter what you do. It’s hard to make a case for the safe use of a roll cage and a nitrous oxide injection system. If, however, that equipment can be removed for off track use, you may be able to negotiate a better rate.

After each modification, apprise the insurance agency of the change and review the terms of the policy. Be sure you understand the following insurance terms:

Actual Cash Value: A policy that will pay benefits at a depreciated “book” value. Modifications will not be covered.

Stated Value: A policy that accepts a value for the vehicle at the time the coverage is written but that does not bind the company to using that value in determining a claim payment.

Agreed Value: The only policy that gives the owner a complete return on modifications. Coverage considers the cost of totally rebuilding the car with identical specifications.

The most important thing to remember in a modification scenario is to never let the policy languish. In essence “modify” the coverage every time you modify the car. Disclose everything. Document everything. Be prepared, if necessary, to educate the insurance company. Be reasonable, understanding that some modifications are more expensive in insurance terms than others, and shoot for the best middle ground premium that meets your needs and also suits their risk profile.