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Modified car insurance: Car modification’s impact on insurance

Team AckoNov 25, 2021

The term "car modification" conjures up an image of a bright coloured, bulky looking car. If you are into sci-fi, you might even think of neon under-glow, a deep turbo-engine sound, and wide tires. But modifications are not limited to aesthetic changes. In fact, modifying your insured car can affect your car insurance policy. Let's discuss how car modifications impact insurance and what you must be aware of before modifying your car.

First, let’s understand more about modifying a car.

Impact of Car Modification on Car Insurance Plan

What do people mean when they say they have a modified car?

To modify means to change and in terms of a car, a modification would mean to make changes in the car. As mentioned earlier, modifications are not limited to the look and feel of your car. There could be several options to choose from. Modifications can range from design to performance enhancements. 

What are the types of car modifications?

Here is a list of some basic types of car modifications that people prefer. 

1. Exterior modifications

One of the most popular types of modification is changing the look of your car. These are exterior modifications. For example, a paint job or visually appealing graphics on the car’s body are common. Then comes the addition of lights. You get unbelievable options and can use your creativity to make the car look more appealing. 

Other examples are changes in the car’s bodywork such as bonnet, flared wings, panels, tyres, etc. Such changes do not directly affect your car’s performance.

2. Interior modifications

Changing the look of the dashboard, and car seats can be aesthetic changes of the interior of the car. Adding a music system, making changes in the air conditioner, and adding accessories like Bluetooth, dual horns, etc. come under interior modifications.

3. Modifications that change performance

People also prefer to modify their cars in such a way that gives better performance output. Changes to the car’s engine, air filter, exhaust system, etc. have a direct impact on the performance of the vehicle. 

For example,

  • Adding nitrous oxide to your car’s mechanics increases its speed. 

  • Broader tyres may result in better stability. 

  • Changing the locking system or adding an anti-theft device can improve the security factor.

Another major modification to a car can be converting the fuel type. For example, getting a CNG kit fitted to a petrol car.

After understanding these basic types of car modifications, let’s move on to discuss how they affect your car insurance policy.

How do modifications affect car insurance?

Remember that there are two basic types of car insurance policies — Third-Party Liability (mandatory by law) and Comprehensive Car Insurance Policy (recommended). Out of these, modifications will only have an effect on a Comprehensive policy. This is because it covers Own Damage, i.e. damage to your car.

While issuing a Comprehensive Car Insurance Policy, your insurer, for example, ACKO, will list various details of the car and then calculate the cost/premium of the policy. When you modify the car, it might happen that the car’s value increases. So you need to inform the insurance company about the modifications. 

Consider, you fail to inform the insurance company about the modifications. Your car suffers damage, say due to a natural calamity. The insurer might either reject the claim or make a partial payment based on the parts originally covered in the policy. 

When you inform the insurer about modifications, they can re-inspect the car, factor in the modifications, and make changes in the modified car insurance policy.

Type of modification Example Reason for change in premium
External Paint job, the addition of front grille, graphics, lights, etc. A modified car may look more appealing, making it more susceptible to theft. Anything that increases the car’s risk profile will shoot up its insurance cost.
Performance Changes in the car's engine, air filter, exhaust system, etc. The cubic capacity of a car’s engine is one of the most important factors that determine its insurance premium. Any change that affects the engine’s cubic capacity changes its car insurance premium. Higher the cubic capacity, higher the car insurance premium.
Performance Adding nitrous oxide to your car’s mechanics. A car driven at a higher speed is vulnerable to accidents and damages. Thus, such changes increase its risk profile and consequently increase the car’s insurance premium.
Internal Addition of accessories like music system, expensive wooden dashboard, etc. You would want to get expensive parts insured under the policy. This can lead to an increase in car insurance premiums.

A standard Comprehensive Car Insurance policy does not cover externally-fitted parts (i.e. parts that are not fitted by the manufacturer).

However, you can choose to add them to the policy with the help of an Accessories Cover Add-on. This can increase the premium of your plan.

Some modifications that do not affect car insurance

Not all modifications to the car can affect your car insurance policy. For example, 

  • changing car seat covers

  • adding alloy wheels, lights, etc.

Simply keep in mind that modifications that do not increase the risk of accidents, or theft of a valuable part will not affect the car insurance policy.

In a nutshell

Major modifications to your car will severely affect your car insurance premium if you have a Comprehensive Car Insurance Policy. If you have purchased a basic Third-party Liability Policy, aesthetic changes to your car will not have an impact on its insurance premium, as this policy doesn’t cover damages to your car. Also, remember that you must inform your car insurance company about modifications to avoid claim rejection.

Frequently asked questions

Following is a list of some questions related to car modification and insurance. Feel free to get in touch with us by sending an email to [email protected] in case of more questions.

I just got a paint job done on the car. Should I tell my car insurance company about it? 

If you choose a new colour for the car then yes you must inform the insurance company. If you are simply repainting the car with the same colour then it is okay to not intimate the insurer.

Are tinted windows allowed in India?

No, fully tinted windows are not allowed in India. The windshield and the rear glass must have at least 70% visibility and other windows must have more than 50% visibility.

One of the family members has recently suffered a disability, and we had to modify the car to make it more accessible. Should I inform the insurance company about this modification?

Yes, you must inform the insurance company about any major modifications. It is most unlikely that a modification of this kind will increase the premium. But, the premium will mostly decrease as per the terms and conditions of the insurance company.

I am an art enthusiast and wish to cover the entire car body with graffiti. Will this increase my car insurance premium?

Your car insurance premium might not get affected due to the graffiti but you must inform the insurance company about this change.

What happens to car claims if the insurance company is not aware of modifications?

An insurance company insures a car after considering all the current details of the car. For example, the engine’s cubic capacity, transmission, manufacturing year, and many other details. They inspect the car during claims to understand the extent of the damage. If the insurance company finds major modifications/differences in the insured car, then they can reject the claim.

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