How Car Modifications Can Affect Insurance Policy

Updated Oct 14, 2023

How Car Modifications Can Affect Insurance Policy

Car modifications are often done to boost the efficiency of the car and to improve its aesthetic appeal. They are desirable by many car owners and are often taken up without knowing the full impact that they may have on the car insurance plan. Various car modifications will have different impacts on an insurance policy and it is imperative to know which modifications would lead to an increase in the premium of the insurance cover.

The reason behind the impact that car modifications have on an insurance plan is important. While they improve the look and feel of a car, they may compromise other areas of its performance, for example, its security. Increasing its vulnerability to theft, such a car modification would likely lead an insurance company to charge you a higher premium than what would have been charged before the modification.

How Changes Do Car Modifications Bring?

There are mainly two areas that are assessed by insurers when assigning your car insurance policy:

Theft Risk

Many performance enhancing modifications would increase the chance that your car is broken into or stolen, and thus have an impact on the insurance premium.

Accident Risk

Many modifications such as engine changes or sports kits would be considered as a factor that increases the risk of accident in a car, likely causing insurance providers to increase the assigned premium.

Types of Modifications and Their Impact On Insurance

Here are some types of modifications that one can acquire and the impact that they would have on one’s car insurance plan:

1. Breaks and Suspension Modification

Modification to the breaks and suspension would change the overall road performance of the car and thus would likely lead to a higher premium, as it may compromise the car’s safety.

2. Engine Modification

Modifications to an engine done in order to tune its performance are likely to increase the risk of accidents. Thus, insurance providers would likely view this as a heightened risk and reflect this in an increased premium.

3. Anti-Theft Devices

One may opt to modify their car by installing anti-theft devices that have been approved by the Automotive Research Association of India (ARAI). Doing so would be assessed by the insurance provider as heightened security against theft and would make the policyholder eligible for discounts on the own-damage policy premium.

4. Cladding Addition or Bodywork

Any modification that may affect the car’s performance, for example, addition of a new spoiler or exhaust system, or modification of the wheel rim, the premium cost may be increased by the insurance company.

5. Interior Modification

The installation or removal of some interior components of the car may affect the driving safety of the vehicle and thus would be reflected in an increased premium charged by the insurance provider.

Conclusion

However, some modifications are considered non risk bearing and may be executed without any impact on the insurance policy. For example, external paintwork, the installation of a sound system or AC, the replacement of seats, or the application of stickers to the car. Thus, it is important to be aware of the impacts of car modifications and to keep your insurance provider apprised of changes to your car.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

Written by Sharad Bajaj

Sharad is an insurance industry veteran who has managed motor insurance products for over a decade. Read More