Many car enthusiasts modify their rides either to increase the cubic capacity or fit aftermarket kits (e.g. CNG kits) to make their vehicles friendlier on the environment. The question is, “Do these modifications have an impact on the existing car insurance
policy?”. Car enthusiasts and vehicle owners would answer, that the modifications should not result in a higher insurance premium.
Let’s look at whether modified cars have higher insurance premiums or not. We will also dive into the minute details of car modifications and their relation to car insurance.
What is car modification?
When you purchase a car, it comes with a default set of accessories, including wheels, engine, music system, etc. These default (or factory-made) components are tested from all the angles by the car manufacturer so that the vehicle is 100% safe for driving on the road. Any modification to these default components is termed as car modification. Even an upgrade to the music system in the vehicle is a modification. The modification can be either an upgrade or downgrade (i.e. choosing options that are budget-friendly). In a nutshell, modifications in the car can be done for enhancing its aesthetics or improving its on-road performance.
The link between ‘Car Modification’ and ‘Car Insurance Policy’
Many car owners opt for car modifications to enhance the overall value of the car. These modifications could be to the exterior or interior of the vehicle. In a majority of the scenarios, upgrades (modifications) increase the vehicle value. Since the value increases, it also results in an increased premium. Even if you own a bike, modifications to it will increase the two-wheeler insurance
Here are some of the factors that impact the car insurance premium:
- Cubic Capacity of the vehicle– It is mentioned in the vehicle’s registration certificate. As per the rules set by the insurance regulator IRDAI, the insurance premium for third-party as well as package (or comprehensive) insurance increases with modifications in the car’s cubic capacity.
- Fuel-type of the car - You might have a CNG kit fitted in the car for better mileage but the kit will lead to an additional premium on the vehicle.
- Add-ons – Basic package insurance only covers the basic accessories that are fitted in the car. Add-ons are to be chosen by the vehicle owner when selecting the insurance policy. Car owners should opt for an accessories cover for additional accessories that are fitted as a part of the modifications in the car.
- IDV – It is called the Insured Declared Value. Normally, IDV decreases with passing time as a car is considered to be a depreciating asset. However, modifications that improve the vehicle’s aesthetics and performance increase the IDV of the vehicle. An increase in the IDV also increases the car insurance premium.
- Claims - Number of claims that have been raised by the driver.
- Registration whereabouts - The place (i.e. state, city) where the vehicle was registered.
Keep the insurer looped-in
Improper modifications to the car can lead to mishaps and this might impact the claim raised after the occurrence of an incident. Hence, it is the responsibility of the vehicle owner to keep the vehicle insurance company informed about the modifications being done to the car.
It is recommended that modifications to the car are done by authorized professionals who have complete knowledge about the internals of a car. Call or email your motor insurance company and inform them about the changes done to the vehicle so that their inspection team can have a detailed look at the same. Based on the inspection results, the car insurance premium is adjusted so that you can enjoy the benefits of car modification and vehicle insurance together.