Do Insurance Companies Cover Modified Vehicles?

When your vehicle is a modified and customized creation, you might wonder if your insurance policy covers it in case of an accident or theft. This article delves into the nuances of modified vehicles and their insurance coverage.

Riders and Special Policies

The answer to whether insurance companies cover modified vehicles lies in the details of your policy. Most standard insurance policies exclude modified vehicles, and an add-on rider or special policy is required to cover them. Without this additional coverage, your insurance company will likely only evaluate your vehicle based on its standard market value, disregarding the modifications you have made.

Current Market Value vs. Modified Value

Let's consider an example. Imagine a 1967 Mustang, with a book value of $1000. You have extensively modified this car, spending $20,000 on a powerful engine, $50,000 on appearance enhancements, and $30,000 on restoration. Your car is now worth about $101,000, far beyond its original book value.

Now, if this car is involved in an accident, or stolen, and you don't have a special policy, your insurance company will likely only cover it at its original book value of $1000. This is because they cannot value the car accurately without specific data on the custom modifications. Additionally, your insurance premiums would be set based on the car's original value, making it more expensive than if you had the proper coverage for its modified state.

Documentation and Valuation

To obtain an appropriate special policy for your modified vehicle, detailed documentation is crucial. You will need to provide extensive documentation, including receipts, photos, and appraisals of the modifications you've made. This documentation is necessary to support your claim and to get the proper coverage.

Insurers often require a custom valuation of your vehicle to determine its current market value. This process can be time-consuming and might involve hiring an appraiser who specializes in modified vehicles.

Special Policies for Modified Vehicles

While some motorcycle insurance policies may allow for upgrades, car insurance does too, although it is more complex and requires a special policy. These special policies can be adjusted to cover the cost of modifications in addition to the original specifications. If an accident occurs, the insurer will pay for the accident repair or vehicle replacement based on the current fair market value, including all modifications.

It is essential to understand that the premiums for a modified vehicle are higher compared to a standard vehicle. Insurers consider the risks associated with custom modifications, such as increased value and potential risks. Therefore, you should be prepared to pay a premium that reflects the actual value of your modified vehicle.

Summary

In conclusion, while your insurance company does cover modified vehicles, it requires a special policy or add-on rider. The valuation process is complex and might involve extensive documentation. Without a special policy, your insurance company will cover your vehicle based on its standard market value, which may be significantly lower than the actual value of your modified vehicle. Always ensure you have proper insurance coverage that reflects the true value of your modified vehicle to protect your investment.

For more detailed information, consult with a professional insurance agent who specializes in modified vehicles. They can provide tailored advice and assistance to ensure that your needs are met.