Do Modified Cars have Higher Insurance Premiums?

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The direct answer to the question in the title is yes. However, things are not that simple. It is better to acquaint yourself with the intricacies involved with car modifications and car insurance to understand their correlation in detail.

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Read ahead to know more about the same.

What is car modification?

A car comes with a certain type of wheels, accessories, engine, etc. When you change such factory-made components by adding or removing certain parts, it is termed as car modification. Such car modifications are often related to performance enhancement or aesthetics.

How does car modification affect insurance?

Car modifications are almost always related to enhancing the car’s value. Be it tinkering with the engine or changing the interiors, modifications increase the car’s value. An increase in car’s value will increase its insurance premium as well.

Factors affecting a car’s Insurance Premium

In order to understand the correlation between car modifications and car insurance premium, it is important to know which factors affect a Comprehensive plan’s insurance premium. Here’s a handy list.

  • Engine’s Cubic Capacity – As mentioned in the car’s registration certificate.
  • Fuel type of the car – Whether it is a fuel-driven or CNG-driven car.
  • PIN code – The location where you drive/register the car.
  • Claim history – Number of claims raised in the past.
  • Add-on covers – Additional covers chosen while purchasing the insurance policy.
  • Car’s Insured Declared Value [IDV] – IDV can be referred to as the approximate current market value of the car. However, it shouldn’t be considered as the car’s resale value. IDV is the value the insured person receives in case the car faces total loss [irreparable damage/theft].

Factors, Modifications, And Insurance

From the points mentioned above, here’s a list of the factors that increase the car insurance premium with respect to modifications.

Engine’s Cubic Capacity

The Insurance Regulatory and Development Authority of India [IRDAI] states the insurance premium of a Third-party Liability component based on the car engine’s cubic capacity. If a modification increases the engine’s cubic capacity, the premium will increase accordingly.

Insured Declared Value [IDV]

Certain external and internal modifications to the car will increase its IDV. Such modifications that increase the IDV will increase the car insurance premium.

Accessories Cover Add-on

A basic Comprehensive plan will not cover the extra-fitted accessories. Thus, they need to be insured with the help of the Accessories Cover. If you opt for an Accessories Add-on for the extra modifications in your car, your insurance premium will increase.

Inform the insurer

You should inform your insurer about the technical and aesthetic changes you make in your car. Consider this example for better understanding – Suppose you modify your car after you have purchased the policy and have not informed your insurer about the same. In case the car is involved in an accident and you raise a claim, the insurer will inspect your car before settling the claim.

At that time, the inspector will find out that the modifications were not disclosed. Such non-disclosure can lead to claim rejection. Thus, it is beneficial for you to disclose the modifications made to your car to avoid any surprises related to claims settlement.

Contacting the Insurer

Whether you have opted for offline vehicle insurance or online vehicle insurance, you should contact the insurer as soon as you make any modifications to your car. As mentioned above, such changes will increase car insurance prices, but that shouldn’t stop you from getting in touch with your insurer. You can call or email your car insurance company to inform them about the change in your vehicle. They might send an inspection team to gauge the modifications and change the car insurance prices accordingly.