With the popularity of reality TV shows like "Pimp My Ride," "Trick My Truck" and "Outcast Kustoms," the popularity of modified cars has grown. Yet before you decide to pay for chrome rims or a custom paint job, it’s important to make sure your auto insurance policy will cover any theft or damage related to the upgrades.
Ken Kurtzmiller, vice president of underwriting at Mercury Insurance in Los Angeles, says: “We do insure most street-legal, modified vehicles that comply with state and federal regulations, and require that non-factory modifications be disclosed. Many modifications would require an extra premium to be covered.”
It can be hard for a traditional auto insurer to place a value on a car whose upgrades make it unlike anything else on the road.
“As a specialty auto insurer, we have an agreed-value policy for modified cars, “ says Rob O’Neill, owner of Town and Country Insurance Services in Burlingame, Calif.
This means that if the customer and the specialty insurer agree on a value of $50,000, then that’s the amount paid out if the car is totaled. If the car isn’t totaled, the customer can have the car repaired and the specialty insurance will cover repairs.
Unlike traditional auto insurance policies, customized policies don’t depreciate the value of a vehicle if you file a damage or theft claim. If you own a 1965 Mustang that has undergone $35,000 worth of modifications, then the agreed-upon value would reflect that investment.
“In the event of an accident or theft, you want an insurance policy that will reimburse you for the value of the modifications made to your car, not just the Kelley Blue Book price,” O’ Neill says.
Jonathan Klinger, a spokesman for Hagerty Insurance in Traverse City, Mich., which specializes in insuring modified cars, says specialty insurers offer coverage for “the fun car you don’t have to have.”
“This isn’t going to be your primary source of transportation, but rather one you drive to work on an occasional basis or take out on the weekend,” Klinger says.
Like most insurers of specialized cars, Hagerty requires a modified vehicle to be stored in a locked garage and to not be the owner’s primary vehicle.
While many customers assume that specialized auto insurance is pricey, Klinger notes that specialized insurance for a modified or classic car typically costs 48 percent less than a standard auto policy.
Insurers say motorists should keep these three points in mind when modifying their vehicles:
1. Put safety first. “Avoid modifications that degrade safety or are not in compliance with regulations,” Kurtzmiller says. “It’s always best to check with the department of motor vehicles before making modifications or purchasing a modified vehicle.”
2. Maintain a paper trail. “Save all of your receipts that show modifications made to your car and make copies of these for your insurance agent,” Klinger says. “Make sure your agent has these upfront; don’t wait until you make a claim to provide documentation or your claim could possibly be denied.”
3. Avoid certain modifications. “We don’t insure autos that have been modified with a nitrous oxide kit,” Klinger says. Nitrous oxide is a colorless gas that can soup up a car's horsepower. Many insurance companies will drop policies on cars with this modification because it enables the car to travel at higher speeds and because it increases the risk of a fire.