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How Can Modifications Impact Car Insurance Premiums?

Automobile personalisation is a passion that everyone would love to try. Everyone likes to upgrade their car, whether it be turbo boosters or exterior stickers. Still, one must remember that these modifications can impact one's finances, including insurance premiums, warranties, and even resale value.

This article explains the various modifications one can make to one's car. It will also outline the changes that may impact vehicle insurance. By reading the article, car enthusiasts can understand the modifications they can make without compromising their insurance coverage.

What is Modified Car Insurance?

Modified vehicle insurance covers vehicles that have undergone specific changes from their original factory specifications. These changes may include modifications to the engine, bodywork, and interior, as well as the installation of high-performance components. 

Regular car insurance often fails to account for these changes, which can impact the vehicle's value and performance. To guarantee that the policy reflects the true value of the modified vehicle, insurers offer modified car insurance. 

Most modified car insurance plans cover both standard and modified parts. Thus providing comprehensive protection for owners of customised vehicles.

Impact of Modifications on Car Insurance Premium

Modifying a car for aesthetic or performance purposes can affect the insurance premiums for that vehicle. Most instances change the risk profile of the car, and thus, they are reflected in the changes made to coverage and premium rates by the insurers. 

A vehicle with modifications poses a greater risk due to its enhanced value or performance. However, specific improvements may not significantly impact the premium. Such changes include accessibility or safety enhancements.

However, aesthetic or performance changes, such as an engine upgrade or a custom body kit, may incur additional costs. Car owners must tell their insurers about vehicle modifications to ensure proper coverage.

Car Modifications That Must Be Disclosed to Insurers

If there have been several modifications or alterations in the automobile system, the user must disclose some details to the insurer. The modifications include:

Engine Upgrades

Modifications to the engine control unit, including the installation of a turbo, help improve the vehicle's overall performance. Therefore, please disclose this modification to the insurer for premium rate calculation.

Suspension Modifications

Alterations made to the suspension, such as lowering or installing coilovers, may compromise the vehicle's operation or safety. Therefore, you must report this to the insurance company.

Custom Body Kits

Any additional parts added to a car in custom mode, such as spoilers or side skirts, are modifications that can affect safety or performance. Thus, an individual should reveal this.

Aftermarket Wheels

Changing or replacing the wheels can alter a vehicle's performance and handling on the road. Hence, it affects how that automobile should be insured for any losses due to the car.

Paint Jobs and Vinyl Wraps

You can change the car's look by making almost minor modifications, such as a custom paint job or something simple like a vinyl wrap, which makes it crucial to inform yourself.

Performance Exhaust Systems

Installing performance exhausts for improved airflow can be risky. This decreases the valuation of your car. Therefore, you should notify your insurer about this.

Car Modifications That Do Not Impact Insurance

Certain modifications do not impact the insurance policies. Here's a breakdown of those changes:

Modification Type Description
Aesthetic Changes Simple alterations that do not affect a vehicle's external appearance or the general function of its systems will generally not impact car insurance premiums.
Minor Cosmetic Changes Repainting the vehicle with the same colour or applying tasteful graphics does not require the insurer to be informed. Such modifications do not alter the vehicle's value or risk profile.
Non-Performance Enhancements Features, including new wheels or lighting, do not improve the car's performance. Insurers consider it a cosmetic rather than a strategic change.
Safety Features Installing safety devices that protect the vehicle and its owner could lead to lower premiums for the policyholder.
Replacement of Equipment Replacing the worn-out piece with the original manufacturer component does not require a declaration from the insurer. It comes under regular mechanical maintenance.
Interior Upgrades Changing the interior with new upholstery or floor mats usually does not affect insurance prices. These changes are never priced except with an expression of personal choice.
Basic Upgrade for Audio System An audio upgrade requiring minimal electrical work will unlikely affect your insurance. Going from a standard factory unit to an aftermarket unit would be fine.

Legal Guidelines for Car Modifications in India

The Motor Vehicles Act, 1988, governs modified cars in India, as well as the Central Motor Vehicles Rules. The prime intent of these laws is to keep the enthusiasm for vehicle personalisation alive. While not neglecting road safety and environmental considerations at the same time. 

The necessary checks ensure that people who make modifications adhere to specific guidelines. This helps avoid the consequences of going astray. Specific guidelines provide that an individual should not install any replacement parts on the frame or chassis, as this alters the vehicle.

Due to the contraventions of these rules, modified cars are subject to severe penalties, including fines and confiscation. Thus, all vehicle owners should register their modified cars with the Regional Transport Office (RTO). Additionally, they should be mindful of established safety regulations. 

How to Get Insurance for Modified Vehicles?

An individual must follow certain step-by-step procedures for smooth insurance registration and execution. Here are the steps to follow:

Step 1: Understand the Laws

First, familiarise yourself with the laws governing vehicle modification in India. Plan to ensure that any changes you make comply with the Motor Vehicles Act and the Central Motor Vehicles Rules.

Step 2: Speak with the Insurer

Consult with your insurance provider. This makes it easier to analyse the effects of the changes on your policy before implementing them. It is essential to determine which alterations require prior approval.

Step 3: File Application with RTO

Write your modifications and submit them as an application to the Regional Transport Office (RTO). This submission leads to the official documentation necessary for the changes.

Step 4: Schedule a Visit

Visit the RTO and wait for your vehicle to be inspected after the specific document has been filed. The inspection is a legal acceptance by the government of modifications.

Step 5: Inform the Post-Modification

After making all necessary changes, confirm them with the insurer. By doing so, the policy will reflect the condition of the motor vehicle.

Step 6: Request Modification Endorsement

Obtain it from the insurer for the entire vehicle and any modifications. This is important because, in future events, this document will help prevent the rejection of the claim.

Step 7: Review Your Insurance Premium

Inform your insurer about any changes to your premiums resulting from a modification. Some changes can lead to increased risks.

Add-ons Available for Modified Car Insurance

Add-on covers are optional features that provide extra protection to your insurance policy. The following are the six most purchased add-ons: 

Add-on Description
Zero Depreciation Cover Covers the full value of vehicle parts without considering depreciation. This is ideal for new vehicles as it reduces out-of-pocket repair costs.
Engine Protection Cover Provides coverage for engine damage due to water ingress, oil leaks, and mechanical failures. It protects against costly repairs not included in standard policies.
No Claim Bonus Protection Allows the policyholder to keep their no-claim bonus even after making a claim. Thus helping to maintain lower premium levels.
Roadside Assistance Cover Offers services such as towing and fuel delivery in the event of a breakdown. Thus ensuring quick help and minimal downtime for safety and convenience.
Return to Invoice Compensates the insured with the original invoice value of the vehicle. Thus, providing full cost recovery for new cars in the event of a total loss.
Daily Allowance Pays a fixed daily amount while the vehicle is under repair. This helps the policyholder manage transportation needs during the repair period.

Things to Consider Before Modifying Your Car

Now that you know the need to follow government guidelines and insurer requirements, let's have a look at the factors to consider before modifying the car:

Legitimacy

Verify if the modification is in accordance with the laws of the land. If so, it may also require RTO certification or testing by authorities such as ARAI. Lack of approval can result in fines, vehicle impoundment, or legal action.

Safety

Opt for changes that promise to improve safety, such as enhanced brakes or suspension, to enhance the car's performance. Innovation should never compromise the integrity of the vehicle.

Impact on Insurance

Depending on the modification, your insurance company must be notified of these changes. These modified parts or engine updates may increase premiums or necessitate additional endorsements.

Performance Needs

Determine if the modifications align with your driving endurance level. How can you improve handling, comfort, and the experience on the drive? These are the questions essential for performance needs.

Cost

Consider the pricing of the components, installation, and even the future maintenance of your car plans. A comprehensive budget would prevent such unexpected increases while allowing for high-quality enhancements.

Professional Use

A genuine, highly skilled mechanic should undertake all car maintenance and repairs. Professional installation reduces issues that may arise from improper changes.

Common Questions About Modified Car Insurance in India

Several common questions have arisen over the car insurance of modified cars. This table responds to common questions: 

Questions Answers
Are all modifications insured? No. Insurers usually assess the type and extent of modification before settling on terms of coverage.
Is it compulsory to inform the insurer of any changes? Yes. Failing to notify an insurance company about modifications can lead to claim denials or result in a lower payout on claims.
What if I don't declare modifications? If you do not report any modifications, the insurer may deny claims arising from the changes. Also, the entire policy will be invalid if it is excessive.
Will I be covered for engine modifications? Yes, if the insurer permits changes made to the engine. Any engine modifications may impact the premium.
Does modified car insurance provide coverage for accidents? Yes, it covers accidents involving standard parts that come approved. However, you must disclose the modification to the insurer.
Is roadside assistance provided on a modified vehicle? Yes, you can add roadside assistance coverage for modified vehicles.

Top Mistakes to Avoid When Insuring Modified Cars

Every car owner who has modified their vehicle may be aware that there are penalties for mistakes when insuring. Avoiding these issues will help those who may require modifications in the future. Here are certain mistakes worth avoiding:

Omission of Modifications Made

Informing the insurance firm about these would ensure they do not refuse the claim. Such information is essential for assessing risk and adjusting coverage.

Inattention to Legal Regulations

People often overlook the guidelines for car modifications. This leads to illegal modifications that void car insurance. Hence, paying attention to legal regulations is essential.

Overlooking Safety Considerations

If you prioritise looks over safety, you will compromise the vehicle's structural integrity and increase the risk of accidents. The reason you opt for such modifications must be made clear.

Selecting Inexperienced Installers

Using unqualified mechanics to alter car features can also result in a bad installation. This can result in performance-stifling consequences and complications.

Not Considering Different Coverage Options

When it comes to obtaining extra coverage for modified parts, many people do not take this step. Thus, their policy would not cover the cost of the parts and enhancements.

Insurance for Classic/Vintage Cars with Modifications

Classic cars with modifications require specialised policies to protect their vintage value and custom alterations. A standard insurance policy may not fully protect the unique aspects of classic cars.

Insurers providing classic car insurance for modified vehicles often need assessments of those changes. Such an assessment determines the updated value of the car and the risks to that vehicle. Most policies cover the original components and the new modifications for thorough protection.

Owners should provide the documentation of all modifications. This helps the insurer assess the car's actual value.

FAQ about Impact of Modifications on Car Insurance

Should I inform my insurer about a new paint job?

Yes, you should inform your insurer about a new paint job, as it can affect the value of your vehicle. This way, the coverage matches the car in its particular condition.

Will performance enhancements increase my premium?

Performance improvements increase premiums, assuming a higher risk in such modified cars. Insurers later assess the modifications made to determine their precursor risk.

Does car insurance cover aftermarket wheels?

Yes, car insurance may cover aftermarket parts if the policy includes coverage for custom parts and equipment.

What happens if I don't disclose modifications to my insurer?

Failing to disclose modifications can result in the denial of an insurance claim or a lower payout in the event of an accident.

Can I insure accessibility modifications for disabled family members?

Yes, you may insure any changes that provide accessibility for your disabled family members. However, you must inform your insurer about those changes.

Which types of modifications do I need to disclose?

You must disclose all notable modifications, such as engine upgrades, body kits, and suspension changes.

How can I find a suitable insurance provider for my modified car?

Assess different companies that specialise in such vehicles. Compare their policies for comprehensive coverage and favourable terms regarding modifications.

Is there a top age limit for cars that may be modified?

There is no definite age limit for modification. However, older vehicles tend to attract more queries regarding car modifications.

How do insurance companies calculate modified car values?

Insurers typically base their evaluation of the vehicle on the market price of the car, as well as the cost of any upgrades. They may also ask for evidence in the form of receipts and records.

Are there insurers who specialise in modified vehicle insurance?

Yes, some insurance companies specialise in providing cover for modified vehicles. Searching through these providers may lead you to suitable policies tailored to your needs.