Basics of Insuring Vehicle with Extreme Modifications

Owners of highly modified cars set themselves up for an adversarial relationship with the insurance industry. As difficult as it may be for the owner to accept, however, it is an important part of the negotiation process to understand where the insurer is coming from in regards to extreme modifications. All they see is increased risk due to extra value and higher performance. The one means a greater chance of theft, the other of an accident. They figure they're going to lose money so they plan to make sure you pay more in premiums. In order to protect yourself from that assumption:

1. Be absolutely honest about all modifications.

The first rule of thumb is don't lie about anything. Be completely forthcoming about every modification and have documentation on hand that illustrates exactly what was done and how it changes the operation and performance of the car. If you don't tell them about a modification and it comes to light after an accident, the company is perfectly within their rights to void your coverage.

2. Be prepared to negotiate on a part by part basis.

It is actually to your advantage to have the company look at every modification on a case-by-case basis. They may like some changes, for instance improved brakes, and get very nervous about others, like a lowered suspension. By discussing each one separately, however, you may achieve the best middle ground, with discounts for some modifications canceling out those things the company isn't wild about.

3. Emphasize details about which the insurance company will approve.

Make it clear that the car is stored in a secure garage and that you have a second car for daily driving. Describe in detail the conditions under which your modified car will be driven and tell the agent if you are a member of a car club or other enthusiasts' group. Convey the impression that your car has personal value to you beyond its monetary value and that, consequently, it is well cared for and guarded. Security systems are a plus as are GPS tracking and monitoring services.

4. Accept that some things are just not going to fly with the insurance company.

Drivers do have to be realistic. It's hard to make a case that your car is just driven to car shows on the weekend if the agent is looking at a roll cage or a nitrous oxide injection system. If, however, these kinds of changes are removable, and you can illustrate that they are only installed for on-track use, you may be able to mitigate their effect on the premium.

5. Get aggressive about insurance quotes.

If you get astronomical quotes from regular companies like AAA, and find that after reading a AAA insurance review they usually won't budge on prices, try the big three names in classic car insurance: Hagerty, Grundy, and American Collectors Insurance. These companies will be more likely to assess the aesthetic and collectible value of your modified car and they are more familiar with incorporating leisure driving provisions into specialized insurance products. These companies, however, may require even more documentation than regular insurers, so go prepared.

6. Know your insurance terms.

Three insurance terms directly apply to insuring your car:

  • Actual Cash Value: A policy written on these terms will only pay out at an appreciated "book" value and will not cover the cost of any modifications.
  • Stated Value: The company pays only a value stated by the owner at the time the policy was issued.
  • Agreed Value: This is the only policy that will let the owner get their complete investment back in the event of total loss. They take into account how much the car cost to build and cover a value necessary to build another vehicle to the same specifications.

There's no sense lying. Insuring a heavily modified car isn't easy and in the end, you will pay higher premiums than those on a "regular" car, but if that's what you wanted, you'd be driving a regular car. You can, however, with honest negotiation, full documentation, and aggressive comparison shopping, get coverage that is at least fair given the highly unique nature of your car.